Has Amazon hit a wall?

At first glance, it might seem like a preposterous question: Has Amazon hit a wall? Even after what most considered a disappointing quarterly earnings report, Amazon's growth and competitive position are the envy of just about every retailer on the planet.

But three worrisome trends were revealed in their earnings release.

First, Amazon Web Services (historically the cash cow that fuels the rest of the company) saw both a marked deceleration in revenue growth and a significant drop in margins. While most companies would kill for what counts as "bad" growth rates at Amazon—and one quarter clearly does not amount to a trend—I always pay attention when growth trends slow and margins start to compress. It could be an anomaly. It could be a short-term hit because of investments that will pay off down the road. Or it could be a sign that the company is having to buy some business through increased discounting. Of note, Microsoft's Azure business grew nearly twice as fast in the same period, albeit on a far smaller base.

Second, the company's North America segment (what most think of as "retail," as it includes both online and physical store sales), which had seen deceleration it its growth rates of late, picked up the pace again delivering a robust 20% year-over-year sales increase. Unfortunately, this revenue spurt came at quite a cost. On the heels of an $800 million investment to make one-day delivery the standard for Prime members, earnings took a big hit. Shipping costs ballooned some 36% in the quarter, continuing the concerning multi-year trend of logistics costs growing as a percentage of sales. While Amazon is not long on details in its releases, it's a pretty good guess that the primary contributor to the acceleration in growth was the roll-out of faster delivery times.

Third, Amazon's physical store segment is treading water. While it is comparatively small—if, at $17 billion annually, hardly insignificant—and mostly composed of Whole Foods, growth was essentially flat (and we know nothing about margins). I'm on record as believing that as pure online shopping begins to mature, physical retail must become an increasingly important contributorto Amazon's overall growth. Despite the challenges at Whole Foods, Amazon is clearly not standing still, expanding its "click and collect" partnerships at Kohl's (and elsewhere) and continuing to experiment with its own brick-and-mortar concepts like AmazonGo, Amazon Books and Amazon 4-Star. Given that Whole Foods' performance is thus far underwhelming, and it appears likely that the other "harmonized retail" initiatives (my term) look to be immaterial to earnings anytime soon, it's not terribly surprising that Amazon is reportedly exploring other alternativesto resume swimming again. I would also not rule out another major acquisition in the next year or two.

Reflecting on this recent earnings report, we are reminded that this would hardly be the first time that Amazon has sacrificed short-term profits for long-term growth. And for the gang in Seattle, they are fortunate that Wall Street continues to go along for the ride. To be sure, AWS is so large and profitable that a minor slowdown is far from alarming. Amazon's advertising business is also on fire. But we should keep a close eye on retail. There is no question that to continue double-digit growth for the foreseeable future, Amazon must penetrate product categories where it historically has disproportionately low relative market share while continuing to reduce shopping barriers where brick-and-mortar stores (or well-harmonized retailers) still have an edge.

So there are three things that seem certain as Amazon enters this critical next phase of growth:

1. It will be massively expensive (particularly supply chain infrastructure, marginal order fulfillment costs and potential acquisitions).
2. Increasingly, Amazon will go head-to-head with well-established industry incumbents, many of whom are finally getting their digital acts together.
3. The likelihood of a delivery and click-and-collect arms race degenerating into a race to the bottom seems fairly high.

Add these concerns to continuing news of workforce issues and a rising chorus of calls to break up large tech companies, and Amazon's future may be quite a bit more bumpy than its recent past.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts here.  

My speaking page has been updated with several fall keynotes. Go here to see more.