Amazon shares fell 13% in extended trading Thursday after the company issued a disappointing fourth-quarter forecast and missed revenue estimates.
Here are the key numbers:
- Earnings: 28 cents per share
- Income: $127.10 billion vs. $127.46 billion, according to Refinitiv estimates
Here’s how Amazon’s other key segments performed during the quarter:
- Amazon Online Services: $20.5 billion versus $21.1 billion expected, according to StreetAccount
- Advertising: $9.55 billion versus $9.48 billion expected, according to StreetAccount
Amazon said it expects to post fourth-quarter revenue of between $140 billion and $148 billion, representing year-over-year growth of 2% to 8%. Analysts had expected sales to reach $155.15 billion, according to Refinitiv.
Revenue rose 15% in the third quarter, marking a return to double-digit sales expansion but still missing Wall Street projections.
Like the rest of Big Tech, Amazon has had a tough year so far as it faces macroeconomic headwinds, rising inflation and rising interest rates. These challenges have coincided with a slowdown in Amazon’s core retail business as consumers returned to shopping in stores.
It’s the second time this year Amazon’s results have been disappointing enough to cause a double-digit sales percentage. In April, a weak forecast for the second quarter led to a 14% drop in the stock.
Under CEO Andy Jassy, who took over from founder Jeff Bezos in July 2021, Amazon has responded to rising expenses by aggressively cutting costs across multiple divisions in recent months. It shed warehouse space, halted some experimental projects, shuttered its telehealth service and froze hiring for corporate roles in its retail business.
Andy Jassy, CEO of Amazon.Com Inc., during the GeekWire Summit in Seattle, Washington, USA, on Tuesday, October 5, 2021.
David Ryder | Bloomberg | Getty Images
“There is obviously a lot going on in the macroeconomic environment,” Jassy said in the press release. “And we will balance our investments to be more efficient without compromising our key long-term strategic bets.”
Amazon CFO Brian Olsavsky said the company cut its capital spending budget for this year by a third after spending heavily over the past two years on things like growing its fulfillment and logistics network to meet the resulting demand. from the pandemic.
The company is now taking steps to “tighten our belt, including halting hiring in certain businesses and closing products and services where we believe our resources are better spent elsewhere,” Olsavsky said.
He added that the economic environment in Europe was worse in the quarter than in North America because “the Ukraine war and the energy crisis issues have really compounded in that geography.”
Amazon’s gloomy forecast does not bode well for the holiday shopping period. Analysts are already bracing for a tough season, with online sales expected to grow just 2.5%, according to Adobe.
Amazon’s first early access sale, held earlier this month, could help drive year-end sales. Data collected by third-party analysts signaled that the event may have been weak, as buyers feel the pressure of inflation. Jassy said in the announcement that customer response to the new discount and Prime Day event, hosted in July, was “quite positive.”
Amazon is capping off a disappointing earnings week for Big Tech. Alphabet and parent Facebook Meta both posted earnings that fell short of expectations as they navigate challenges in the digital ad market. Microsoft wasn’t immune, reporting softer-than-expected cloud revenue and weak quarterly guidance.
Apple, which also reported Thursday, beat on earnings and revenue but underperformed in key product categories including its iPhone business and services unit. The stock is trading lower after hours.
Operating income at Amazon fell by almost half from a year ago to $2.53 billion from $4.85 billion. Amazon Web Services accounted for all of the company’s profit, plus some, as the cloud unit generated $5.4 billion in operating income. However, AWS posted its slowest revenue growth since 2014, when Amazon began publishing results for the unit.
Amazon’s ad business was a bright spot in the results, bucking the trend of its digital ad peers Facebook, Google and Snap, whose ad businesses have been hit by the economic environment and Apple’s iOS privacy changes last year. Advertising revenue rose 25% year-over-year to $9.55 billion during the quarter, handily beating analysts’ estimates of $9.48 billion.
Analysts have taken different approaches to their earnings-per-share estimates because of Amazon’s big investment in electric vehicle maker Rivian, which went public late last year. Amazon reported net income of $2.9 billion in the third quarter, which includes a $1.1 billion gain in non-operating income from its Rivian stake. In the previous two quarters, the Rivian investment resulted in total write-downs of $11.5 billion.
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