The part of this report that is relevant to this thread is this:
Amazon Web Services reported operating income nearly doubled to $2.08 billion and revenue grew 46% to $6.68 billion.
Amazon Reports Another Profit but Sales Underwhelm -- Update
DOW JONES & COMPANY, INC. 4:52 PM ET 10/25/2018
Symbol Last Price Change |
| AMZN | 1782.17 | +117.97 (+7.09%) | | QUOTES AS OF 04:00:00 PM ET 10/25/2018 |
Amazon.com Inc. (AMZN) continued its streak of profitability, topping $1 billion for the fourth straight quarter, but reported lackluster sales figures.
The Seattle-based company on Thursday reported a profit of $2.88 billion, or $5.75 per share, up from $256 million, or 52 cents, a year ago. Analysts polled by Refinitiv, on average, expected Amazon(AMZN) to earn $3.14 a share.
Revenue increased 29.3% to $56.58 billion, its slowest-growing quarter in more than a year and short of the average analyst estimate of $57.1 billion. For the current quarter, which includes the key holiday season, Amazon(AMZN) projected sales between $66.5 billion and $72.5 billion, below the estimate of $73.89 billion on Refinitiv.
Shares of Amazon(AMZN) fell 6% to $1,676 in after-hours trading. Before the report, the stock rose 7.1% Thursday.
As Amazon(AMZN) has grown beyond its traditional retail roots, so has its profitability. High-margin business like the services it offers independent merchants on its site, advertising and its cloud-computing business have all helped offset some of its high expansion and logistics costs.
Still, the company faces higher costs starting in the fourth quarter, when it said it would raise its minimum wage for warehouse and customer service workers to $15. That is expected to cost the company $3 billion next year, Morgan Stanley analysts have projected. Plus, Amazon(AMZN) is facing higher U.S. Postal Service rates as the quasigovernmental agency raises prices.
Amazon (AMZN) increased its minimum wage in part to address criticism from politicians including Sen. Bernie Sanders, who recently introduced a bill called the BEZOS Act aimed at taxing big companies whose employees rely on federal benefits to make ends meet. Mr. Sanders praised Amazon's(AMZN) wage hike, calling it a possible "shot heard around the world."
Amazon's (AMZN) third quarter is also traditionally one with higher spending as the company gears up its retail division for the all-important holiday season.
For the fourth quarter, Amazon(AMZN) forecast operating income of between $2.1 billion and $3.6 billion.
Amazon (AMZN) is also facing more competition for its cloud business, as Microsoft Corp. on Wednesday reported 76% growth for its cloud-computing business Azure. Alphabet Inc.'s Google has also been growing its market share in the business.
Amazon Web Services reported operating income nearly doubled to $2.08 billion and revenue grew 46% to $6.68 billion.
As the company heads into the fourth-quarter holiday season -- which typically drives a surge in revenue -- Amazon(AMZN) is well-positioned with its dominant e-commerce business, which is estimated to total roughly half of all online sales in the U.S. The company's acquisition of Whole Foods Market also has added a stream of physical store revenue, which brought in $4.25 billion for the third quarter.
Amazon (AMZN) has been rapidly adding delivery and pickup options to its Whole Foods stores, as well as Prime member perks like special, in-store discounts.
Shipping costs rose 22% in the quarter to $6.57 billion, a slower growth than usual. The company's workforce now totals 613,300.
Amazon (AMZN) also is taking some digital-advertising business, albeit small, away from Google and Facebook as brands advertise more on the online retailer's site. Amazon's(AMZN) advantage is that it can tell advertisers when a consumer bought a product, showing an ad's effectiveness. Amazon(AMZN) also is attracting spending that would have traditionally taken place in bricks-and-mortar stores to ensure good shelf placement.
Amazon's (AMZN) "other" category, which is primarily derived from advertising, more than doubled to $2.5 billion.
Amazon's (AMZN) shares have been battered along with the overall market this month, sending prices down nearly 20% from an all-time high in September. Amazon(AMZN) briefly surpassed a trillion dollars in market value earlier this year, becoming the second company after Apple Inc. to do so.
Write to Laura Stevens at laura.stevens@wsj.com |
