AWS didn’t exist until after Amazon became profitable. They were already making good long-term decisions before AWS.

Amazon, the store. the store that sells stuff at “unbeatable” prices and has convenient fast shipping options. exists because Amazon, the corporation, makes most of its money through platforms that are NOT the store.

They were also famously unprofitable for a very long time, longer than most businesses would consider reasonable. They were founded in 1994 and it took until 2003 to make a profit. They were investing a lot of money back into the business.

No one else uses the term “cloud” like that

Broadly, “the cloud” is just someone else’s computer. VPSes still fall into that definition. A lot of VPS providers describe themselves as “cloud” now too (eg one of the main hosts I use, HostHatch, describes themselves that way on their site).

If a single AWS EC2 or Lightsail server (which is essentially just a VPS in one region) is considered to be “in the cloud”, why not a much cheaper, more powerful server with a different provider?

It could be their own cloud. I refer to my VPSes as “the cloud” even though that’s still self-hosting. My “cloud storage” would just be a 10TB storage VPS I’ve got.