Amazon reported weaker-than-expected second-quarter sales on Thursday and gave disappointing guidance for the current period. Shares fell as much as 6% in extended trading.
This is how the company performed:
- Merits: $1.26 per share versus $1.03 per share expected by LSEG
- Revenue: $147.98 billion versus $148.56 billion expected by LSEG
Wall Street is also watching these important numbers:
- Amazon Web Services: $26.3 billion versus $26 billion in revenue, according to StreetAccount
- Advertising: $12.8 billion versus $13 billion in revenue, according to StreetAccount
Amazon forecast revenue for the current quarter to be between $154 billion and $158.5 billion, representing growth of 8 to 11 percent compared to the third quarter of last year. The midpoint of Amazon's forecast range was $156.25 billion, according to LSEG, below the average analyst estimate of $158.24 billion.
Amazon continues to face sluggish growth in its core retail business as competition increases, particularly from discount websites such as Temu and Shein, which allow Chinese merchants to sell cheap items to U.S. consumers. Revenue in the online store segment grew just 5% year over year. Revenue from third-party services, which includes commissions and fulfillment and shipping fees, is growing faster, rising 12% in the quarter.
“We fell slightly short of our internal estimates in North America revenue growth,” Chief Financial Officer Brian Olsavsky said in a conference call with reporters after the report was released.
According to Olsavsky, the reason for the decline was that consumers opted for cheaper products, resulting in a lower average selling price (ASP).
“We are seeing that the products customers are choosing are in the range of the ASP or even below,” Olsavsky said. “They continue to be cautious with their spending and are turning to products with lower ASP.”
The company expects third-quarter operating profit to be between $11.5 billion and $15 billion, compared to $11.2 billion in the same period last year. Analysts surveyed by StreetAccount forecast third-quarter operating profit of $15.3 billion.
In the cloud space, AWS beat estimates, growing 19% year over year, but the division is growing more slowly than its competitors. Microsoft And GoogleBoth companies reported 29% cloud growth in their respective earnings reports, although their numbers include more than just cloud infrastructure.
Amazon's advertising revenue rose 20% to $12.77 billion in the quarter, just below estimates. The division has become one of Amazon's biggest profit generators, and while the majority of advertising revenue continues to come from sponsored product listings on its online store, the company has added newer offerings and increased its market share in the digital ad segment, where it has Meta And alphabet.
Among online advertising companies, Meta had the strongest quarter, reporting a 22 percent increase in revenue. Google's ad business grew just 11 percent in the quarter. Snap in said on Thursday that sales rose 16% year-on-year.
Amazon's net income doubled from a year ago to $13.5 billion, or $1.26 per share, from $6.75 billion, or 65 cents per share, reflecting massive cost-cutting measures across the company.
Olsavsky said the company attributes the weakness in its forecast in part to consumers being distracted by world events, which he said made the quarter “difficult to forecast.” He pointed to the Olympics that began in Paris last month and the attempted assassination of Donald Trump at a rally in July.
“No matter what you're selling or offering to a customer base, customers' attention span is limited. With events like the Olympics, which don't happen as often, we see different traffic patterns around those events,” Olsavsky said. “When high-profile events happen, or the assassination attempt a few weeks ago, you see people focus their attention on the news.”
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