Amazon Posts Smaller-Than-Expected Profit
October 27 2016 - 4:50PM
Dow Jones News
Amazon.com Inc. posted a smaller-than-expected increase in
third-quarter profit on a sharp increase in shipping and other
expenses.
Shares fell 5.9% in after-hours trading and finished down 0.5%
on Thursday.
Amazon's shipping costs rose 43% in the third quarter to $3.9
billion. The retail giant has started laying the groundwork for its
own shipping business to add more delivery capacity for the
holidays, with the grander ambition of one day hauling and
delivering packages for itself, other retailers and consumers.
Some of Amazon's big investments helped guide it toward its
current profitability, such as its popular Echo speaker device and
its highly automated warehouses and logistics network.
Amazon is also targeting new growth markets like fashion and
beauty, where analysts expect quick gains due to its relatively
small market share.
In all, earnings rose to $252 million, or 52 cents a share, from
$79 million, or 17 cents a share, a year earlier. Analysts surveyed
by Thomson Reuters expected earnings of 78 cents a share.
Sales of $32.7 billion, up from $25.36 billion, were within
Amazon's own forecast of $31 billion to $33.5 billion.
It issued revenue guidance of $42 billion to $45.5 billion for
the fourth quarter, when holiday sales—and its ability to deliver
those orders on time—are critical to Amazon's success. Analysts
were looking for $44.6 billion.
The Seattle-based online retailer's profits were boosted by its
Amazon Web Services cloud computing division, which increased sales
by 55% to $3.23 billion. The unit, which rents computing power to a
variety of startups, government agencies and other corporations,
has become a major factor in leading the company to its sixth
straight quarter in the black.
Chief Executive Jeff Bezos has said he expects AWS to reach $10
billion in sales this year, even as competitors including Microsoft
Corp. and Alphabet Inc. ramp up competitive pressure in the
space.
Thursday's numbers bring Amazon closer to investors' long-held
hopes of consistent profitability. The company has seesawed in and
out of the black since its stock market listing nearly 20 years
ago. Long after Amazon became the giant of e-commerce, it pumped
revenue gains back into product development and operations.
Write to Laura Stevens at laura.stevens@wsj.com
(END) Dow Jones Newswires
October 27, 2016 16:35 ET (20:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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