Amazon Posts Smaller-Than-Expected Increase in Profit -- 2nd Update
28 October 2016 - 8:25AM
Dow Jones News
By Laura Stevens
Amazon.com Inc. posted a smaller-than-expected increase in
third-quarter profit as shipping costs surged and the e-commerce
company pumped revenue gains back into product development and
operations.
Its shares fell 4.8% in after-hours trading as the midpoint of
the company's outlook for the holiday quarter also fell short of
expectations.
Amazon logged its sixth consecutive quarter of profits after
seesawing in and out of the black -- while reporting hefty sales
increases -- since its stock market listing nearly 20 years ago. In
the third quarter, its sales of $32.7 billion were nearly eclipsed
by total operating expenses that climbed 29% to $32.1 billion.
Shipping costs rose 43% 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, its 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.
Its 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.
Write to Laura Stevens at laura.stevens@wsj.com
(END) Dow Jones Newswires
October 27, 2016 17:10 ET (21:10 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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