Amazon (AMZN) shares tanked nearly 20% in after-hours trading on Thursday after it reported misses on revenue and sales for its Amazon Web Services cloud business, along with disappointing fourth-quarter guidance.
Here’s what came down from the e-commerce giant after the bell:
Revenue: $127.1 billion actual versus $127.63 billion expected
Adjusted Earnings Per Share (EPS): 28 cents actual versus 22 cents expected
Amazon Web Services (AWS) Net Sales: $20.5 billion actual versus $21 billion expected
For the fourth-quarter, Amazon guided to between $140 billion and $144 billion instead of the expected $155 billion. The company, like others that operate internationally, has been hurt by the strong dollar. Amazon also faces headwinds from inflation, rising interest rates, and fears of a recession. Q4 notably includes the holiday season, which the company is predicting to be tempered.
“There is obviously a lot going on in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our strategic, long-term bets,” Amazon CEO Andy Jassy said in a statement on Thursday.
Amazon clocked losses the last two quarters, and still turned a profit. In Q3, Amazon’s operating income came in at $2.5 billion, compared with $4.9 billion in the same quarter last year. Though the company’s Q3 international operating loss was was $2.5 billion, AWS made up the difference, reporting a Q3 operating income of $5.4 billion.
The Prime Day events of the last few months didn’t boost Amazon’s revenue as much as investors might have hoped. July’s Prime Day — included in the earnings release — the company’s biggest ever in terms of the number of purchases, as Prime members worldwide bought more than 300 million items. The company didn’t disclose the revenue figures from the event.
The AWS miss is also a notable disappointment, as there was a lot of optimism from analysts going into Thursday and it’s been a stalwart of the company. Raymond James analyst Aaron Kessler expects “continued leadership and momentum in cloud [and] AWS,” he wrote in an Oct. 25 note.
There’s just no forgetting the extent to which this environment, from a hawkish Fed to the specter of a recession, has rattled Big Tech.
“White knuckle fears around 3Q earnings season and negative revisions have sent tech stocks into a tailspin lower,” Wedbush analyst Dan Ives wrote earlier this month. “Any positive news is negative news… in this market, and bad news is perceived as Armageddon and thus takes down tech stocks in a heartbeat.”
Big Tech’s rough week continues
It’s been a tough stretch for Big Tech — even before this week — and Amazon has been no exception. This week, we’ve seen the consequences of inflation’s squeeze on consumer spending. Google-owner Alphabet (GOOG, GOOGL) saw its shares drop after YouTube ad revenues came up short, while Meta’s (META) stock has been in free fall after its earnings miss on Wednesday.
The results re-affirm that Amazon’s far from immune to the consumer slowdown. This month, the company’s second Prime event reportedly didn’t stack up, according to both CNBC and Fortune. This month, Bank of America analysts estimated that Amazon brought in $5.7 billion from October’s Prime Early Access Sale, a drop from the $7.5 billion it estimated Amazon’s July Prime event raked in.
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks.
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Source: https://finance.yahoo.com/news/amazon-third-quarter-earnings-163558342.html