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Amazon.com
Inc.
AMZN 7.09%
continued its profitability trend, surpassing the $ 1 billion mark for the fourth consecutive quarter, but posted weak sales growth.
The Seattle-based company announced Thursday a profit of $ 2.88 billion, or $ 5.75 per share, against $ 256 million, or 52 cents, a year ago. Analysts surveyed by Refinitiv expected, on average, to earn $ 3.14 per share.
Revenues increased 29.3% to $ 56.58 billion. This is the quarter that has seen the slowest growth in more than a year and is below the average estimate of $ 57.1 billion by analysts. For the current quarter, which includes the holiday season, projected sales by Amazon range between $ 66.5 and $ 72.5 billion, an amount lower than the estimate of $ 73.89 billion for Refinitiv.
Amazon shares fell 6% to 1,676 USD after trading hours. Before the report, the stock rose 7.1% Thursday.
As Amazon has grown beyond its traditional roots in retail, so is its profitability. High margin activities such as the services it offers to independent merchants on its site, advertising and its cloud computing business have helped offset some of its high costs of expansion and logistics.
Nevertheless, the company faces higher costs starting in the fourth quarter, when it announced that it would increase its minimum wage for warehouse and customer service employees to 15 percent. $. This should cost the company $ 3 billion next year,
Morgan Stanley
analysts have projected. In addition, Amazon faces higher US postal rates, with the quasi-government agency raising prices.
Amazon has raised its minimum wage partly to respond to criticism from politicians, including Senator Bernie Sanders, who recently introduced a bill called the BEZOS Act, which aims to tax the large corporations whose employees depend on federal benefits to join two ends. Sanders praised Amazon's pay increase as "a shot fired worldwide."
Amazon's third quarter is also traditionally characterized by higher spending as the company develops its retail division for the holiday season of utmost importance.
Amazon expects fourth-quarter operating profit of between $ 2.1 billion and $ 3.6 billion.
Amazon is also facing increased competition for its cloud business, such as
Microsoft
Corp.
announced Wednesday a 76% growth for its cloud computing company, Azure.
Alphabet
Inc.
Google has also increased its market share in the sector.
Amazon Web Services announced that its operating income had almost doubled to $ 2.08 billion, and its revenues had increased 46% to $ 6.68 billion.
As the company enters the fourth quarter holiday season, which typically generates revenue growth, Amazon is well positioned with its dominant e-commerce business, estimated at about half of all online sales in the United States. Whole Foods Market's acquisition also added a revenue stream to physical stores, which earned $ 4.25 billion for the third quarter.
Amazon quickly added delivery and collection options to its Whole Foods stores, as well as premium member benefits, such as special in-store discounts.
Shipping costs increased 22% in the quarter to $ 6.57 billion, a slower growth than usual. The total workforce of the company is now 613,300.
Amazon is also taking some even small digital advertising activities away from Google and
the brands advertise on the online retailer's website. The advantage of Amazon is that it can inform advertisers of when a consumer buys a product, thus showing the effectiveness of an ad. Amazon also attracts spending that would have traditionally occurred in physical stores to ensure proper placement of shelves.
Amazon's "other" category, which comes primarily from advertising, more than doubled to $ 2.5 billion.
Amazon shares have been hit hard with the global market this month, dropping prices by nearly 20% from the record high in September. Amazon briefly exceeded the market value of $ 1 trillion earlier this year, becoming the second largest company after
Apple
Inc.
do this.
Write to Laura Stevens at [email protected]
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