Amazon warns of holiday disappointment despite Q3 earnings beat

E-commerce and web services conglomerate Amazon warned of holiday disappointment in its after-hours earnings release on Thursday, with quarterly profit falling despite growing revenue.

The company said revenue for the third quarter totalled $127.1bn, which was up from $110.8bn year-on-year but still slightly below market consensus.

Its board claimed revenue would have been another $5bn higher, were it not for the dollar’s recent, sustained strength.

Amazon’s profit came in at $2.87bn, or 28 cents per share, which was down from 31 cents a year ago, but still well above the 22 cents pencilled in by analysts.

The real sting for investors, however, came from the company’s fourth-quarter guidance, with Amazon pencilling in an operating profit of between breakeven and $4bn on sales of $140bn to $248bn.

Analysts were previously looking for profits of at least $5bn, on revenue of more than $155bn in the key holiday sales period.

“In the past four months, employees across our consumer businesses have worked relentlessly to put together compelling Prime member deal events with our eighth annual Prime Day, and the brand new Prime Early Access Sale in early October,” said chief executive officer Andy Jassy.

“The customer response to both events was quite positive, and it’s clear that particularly during these uncertain economic times, customers appreciate Amazon’s continued focus on value and convenience.”

Jassy said the company was also encouraged by the “steady progress” it was making on lowering costs in its stores fulfilment network, and had a set of initiatives it was “methodically working through” to yield a “stronger cost structure” moving forward.

“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.

“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.”

Shares in Amazon ended the session down 4.06% on Nasdaq at $110.96, and were last down a further 13.57% in after-hours trading.

Reporting by Josh White for Sharecast.com.