Amazon shares hit by earnings disappointment

13:00 | 05/11/2019
Amazon on Thursday (Oct 24) reported that quarterly profits fell shy of Wall Street forecasts, sending shares of the tech giant tumbling in after-market trades.
amazon shares hit by earnings disappointment
Amazon CEO Jeff Bezos said the move to one-day delivery for most items will put the e-commerce giant in a strong position for the upcoming holiday season AFP/MANDEL NGAN

Net income slid 27 per cent from last year to US$2.1 billion, with profits pressured by Amazon's spending to speed up most deliveries to one day.

Revenue climbed 24 per cent to US$70 billion in the quarter to Sep 30, compared to the US$56.6 billion in sales logged in the same period a year earlier, according to the Seattle-based company.

Amazon shares were down nearly 7 per cent in after-market trades that followed release of the earnings figures.

Cost of sales at Amazon leapt about 33 per cent , eating into net income, according to the earnings report.

Amazon has been pushing to deliver packages more quickly, promising a wide selection of items to arrive within a day of being ordered by members of its Prime subscription service.

"We are ramping up to make our 25th holiday season the best ever for Prime customers - with millions of products available for free one-day delivery," said Amazon chief executive Jeff Bezos in the earnings release.

"Customers love the transition of Prime from two days to one day - they've already ordered billions of items with free one-day delivery this year. It's a big investment, and it's the right long-term decision for customers."

Amazon has also positioned itself for the year-end holiday shopping season with a freshened lineup of Alexa-powered products on extending from homes and cars to wearable devices, and a celebrity voice option for the popular digital assistant.

Amazon, one of the world's most valuable companies, has expanded from its origins in e-commerce to cloud services, streaming media, artificial intelligence and brick-and-mortar grocery stores, with its own lineup of consumer electronics.


Analyst Andrew Lipsman at the research firm eMarketer called the quarterly results "a very mixed bag for Amazon with a couple shining bright spots but also some clouds looming in the cloud business."

Lipsman said the cloud computing unit AWS is seeing "softening in growth rates" which he said "will weigh on the company's profits if they can?t reverse the trend."

The analyst said Amazon's advertising and e-commerce operations "look very strong as investments in next-day shipping, though eating into the bottom line in the near term, are paying fast dividends on the top line."

In a product launch last month in Seattle, Washington, Alexa was the star as Amazon sought to widen the reach of its digital assistant powered by artificial intelligence amid a battle with rivals from Google, Apple, Microsoft and others.

Along with beefing up the Echo and Ring lines, Amazon introduced earbuds it touted as providing the first wearable, hands-free Alexa experience on the go.

The Amazon voice assistant was also infused prototype eyeglass frames on display at the media event along with an enhanced array of Echo smart speakers.


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