Last week, (NASDAQ:AMZN) reported another quarter of stellar growth. Its fourth-quarter revenue surged past analysts' estimates, reaching the high end of the company's guidance range. Amazon also posted a record profit of $1.9 billion.

Many pundits seized on this record profit as a sign that Amazon's huge investments are paying off in a big way. However, while the company's ability to keep revenue growing at a rapid rate is certainly impressive, Amazon still hasn't proved that it will be able to deliver the long-term margin expansion and free cash flow investors are counting on.

Growth continues unabated

Amazon generated $60.5 billion of revenue last quarter, up 38% year over year. A significant portion of that increase was driven by the company's acquisition of Whole Foods Market last year, as well as exchange rate fluctuations. Excluding those factors, revenue would have been roughly $54.8 billion, up 25% year over year.

Amazon Web Services remains the company's biggest growth driver, at least on a percentage basis. AWS revenue rose 45% last quarter, surpassing $5 billion. Meanwhile, organic revenue growth for Amazon's retail operations was a little less than 25%.

The exterior of an Amazon fulfillment facility

Amazon's retail business posted organic growth of nearly 25% last quarter. Image source:

This organic retail growth rate was modestly higher than in the prior-year period. In Q4 2016, Amazon's retail revenue rose 22% in North America and 23% overseas, excluding exchange rate fluctuations. Amazon's ability to maintain its growth rate in spite of increasingly difficult comparisons is remarkable.

Profit remains lumpy -- and cash flow scarce

Amazon's headline fourth-quarter profit of $1.9 billion is misleading, as it includes an estimated $789 million one-time tax benefit from the recent U.S. tax reform bill. Operating income (which excludes taxes) provides a better basis for comparison.

Amazon posted operating income of $2.1 billion in the fourth quarter, up nearly 70% year over year. This probably includes about $200 million of operating income from Whole Foods, based on the latter's historical performance. Still, any way you slice it, Amazon achieved a substantial profit increase last quarter.

However, one quarter doesn't make a trend. In the third quarter, Amazon's operating income plunged 40% year over year. For 2017 as a whole, operating income slipped by 2%, reaching $4.1 billion.

Amazon's profitability looks even worse on a cash basis. Officially, free cash flow was $8.4 billion last year. However, this doesn't count property acquired using capital leases. Including that form of capital spending, Amazon's 2017 free cash flow was negative. Furthermore, the company doles out a huge amount of non-cash compensation. Amazon awarded 7 million shares last year, worth approximately $10 billion based on Amazon's current stock price.

Are Amazon's investments paying off?

Over Amazon's 25-year history, founder and CEO Jeff Bezos has made a lot of smart long-term investments. The fact that Amazon isn't producing free cash flow isn't necessarily an indictment of the company's strategy. For example, the creation of Amazon Web Services turned out to be a huge home run.

However, Amazon's investments in international markets don't seem to be justified. Up until 2015, Amazon appeared to be running at roughly breakeven in its international segment, which encompasses all of its retail operations outside North America. Yet that was only because it was excluding vast sums of stock-based compensation from its segment operating income.

For the past two years, Amazon has been including the cost of those stock awards. As a result, the company reported an international segment loss of $1.3 billion in 2016 and $3.1 billion in 2017. It's hard to understand why the company is pouring huge sums of money into its slowest-growing segment. Even if Amazon can eventually bring its international operations to profitability, this is never going to be a high-margin business like AWS.

Thus, investors should recognize that Amazon is paying an extremely high price to keep revenue growing quickly. It's far from obvious that this will work out for shareholders in the long run.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.