From The Wall Street Journal:
Amazon.com Inc. ’s profit machine sputtered again after more than two years of surging growth, weighed down by the tech giant’s heavy investment into reducing shipping times for retail customers.
Amazon on Thursday said its third-quarter profit fell 26% from a year ago to $2.1 billion, or $4.23 a share, missing analysts’ consensus estimate of $4.59 a share, according to FactSet. That was its first profit decline since 2017, and followed a second quarter in which the company ended its streak of record quarterly profits and missed analyst expectations.
Revenue in the latest period rose 24% to $70 billion—better than analysts’ estimates—compared with a 20% increase three months earlier. The third quarter included Prime Day, a July shopping event created to sign up new Prime subscriptions by offering members steep sales discounts.
Amazon’s profit miss sent shares down more than 7% in after-hours trading Thursday. Before the late-afternoon report, the stock was up nearly 16% this year, giving the company a market value of around $881 billion.
“Investors were beginning to get used to the new Amazon of getting better bottom-line upside. Now, we’re back to the old Amazon, which is bottom-line downside but big investments,” Jefferies analyst Brent Thill said. “For short-term investors it’s a bummer, but for long-term investors, they realize that with Amazon these investments usually pay off.”
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Amazon’s world-wide shipping costs jumped 46% to $9.6 billion from the previous year as the company processes higher expenditures related to its one-day shipping program for Prime subscribers. Online sales growth has accelerated as Amazon has invested more into one-day shipping. Sales in online stores rose 22% in the third quarter, double the growth rate a year earlier.
In the fourth quarter, the company expects to spend roughly double what it did in the second quarter on one-day shipping, or $1.5 billion, to facilitate the program, Chief Financial Officer Brian Olsavsky said on a call with media Thursday.
In addition to getting product closer to customers by having inventory dispersed among its warehouses, Amazon saw a steep hiring increase for the quarter, with employment reaching 750,000 workers. Mr. Olsavsky said this jump was more pronounced this year because of the onset of one-day Prime shipping.
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Amazon’s advertising business registered $3.6 billion in sales, a 43.7% increase from the year-earlier period. The unit, which sells advertising space in the form of sponsored products in search and display ads, has become another cash cow for the company.
Link to the rest at The Wall Street Journal (Sorry if you encounter a paywall)