Amazon returns to profitability amid mixed Q3; sounds warning on holiday sales
Amazon posted a mixed third quarter as its lucrative cloud business slowed and it warned that holiday sales would come in well under expectations.
Although the e-commerce giant returned to profitability after two consecutive quarters of losses, its earnings were down from last year. Amazon reported profit of $2.87 billion, or $0.28 cents a share, for the quarter ended Sept. 30, down from $0.31 cents a share in the year-ago quarter after adjusting for Amazon’s 20-to-1 stock split. Amazon’s 20-to1 stock split. Analysts has expected earnings of $0.22 a share.
Amazon’s operating income decreased to $2.5 billion in the third quarter, compared with $4.9 billion in third quarter 2021. Shipping costs rose 10% to $19.9 billion for the quarter.
Revenue rose 15% to $127.1 billion, just missing analysts’ expectations of $127.39 billion. (Company executives said revenue would have been $5 billion higher without the effects of the strengthening dollar.) Revenue was boosted by the company’s annual Prime Day event in July.
Revenue at Amazon Web Services, the company’s lucrative cloud business, rose 27% to $20.5 billion. It is the slowest growth since 2014, when the company began breaking out results for AWS, which now accounts for 16% of Amazon’s total revenue.
Quarterly retail sales in North America totaled $78.84 billion, while overseas revenue totaled $27.72 billion.
“There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets,” stated CEO Andy Jassy in a release. “What won’t change is our maniacal focus on the customer experience, and we feel confident that we’re ready to deliver a great experience for customers this holiday shopping season.”
Amazon said that its fourth-quarter revenue would be between $140 billion and $148 billion, representing year-over-year growth of 2% to 8%, which was below analysts’ estimates of $155.09 billion.
“People’s budgets are tight, inflation is still high, and energy costs are an additional layer on top of that,” Amazon’s CFO Brian Olsavsky said during a call. “We are preparing for what could be a slower growth period.”
Olsavsky noted that, as it has done “in similar times in our history,” Amazon is “taking action to tighten our belt, including pausing hiring in certain businesses and winding down products and services where we believe our resources are better spent elsewhere.”
The company, however, has not cut back on holiday hiring plans.
[Read More: Amazon to hire 150,000 employees for holiday shopping rush]