Amazon stock sinks 13% on weak fourth-quarter guidance

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  • Amazon on Thursday reported third-quarter results that missed analysts’ estimates.
  • It also delivered a disappointing sales forecast for the fourth quarter.
  • The stock sank in extended trading.

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heroine Shares fell 13% in extended trading on Thursday after the company released a disappointing fourth-quarter forecast Missed on revenue projections.

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Here are the prime numbers:

  • Earnings: 28 cents per share
  • revenue: $127.10 billion versus $127.46 billion by Refinitiv estimates

Here’s how the other major Amazon segments performed during the quarter:

  • Amazon Web Services: $20.5 billion versus $21.1 billion expected according to StreetAccount
  • advertising: $9.55 billion versus $9.48 billion expected, according to StreetAccount
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Amazon said it expects fourth-quarter revenue between $140 billion and $148 billion, representing year-over-year growth of 2% to 8%. Analysts were expecting sales of $155.15 billion, according to Refinitiv.

Revenue increased 15% in the third quarter, marking a return to double-digit sales expansion, but it still fell short of Wall Street estimates.

Like the rest of Big Tech, Amazon has had a rocky year so far as it faces macroeconomic headwinds, rising inflation and rising interest rates. Those challenges have coincided with a slowdown in Amazon’s core retail business, as consumers return to shop in stores.

This is the second time this year that Amazon’s results have been disappointing enough to spark double-digit percentage sales. In April, the stock lost 14% on a weak second-quarter forecast.

Under CEO Andy Jesse, who took over from founder Jeff Bezos in July 2021, Amazon has responded to rising spending in recent months by aggressively cutting costs across multiple divisions. This left warehouse space, some experimental halts projectsdiscontinued its telehealth service and prohibited recruitment for corporate roles in its retail business.

“Obviously a lot is happening in the macroeconomic environment,” Jassi said in the press release. “And we will balance that to further streamline our investments without compromising our key long-term, strategic bets.”

Amazon CFO Brian Olsavsky said the company cut its capital spending budget by a third for this year after spending heavily over the past two years on things like ramping up its fulfillment and logistics network to meet pandemic-induced demand. cut of.

The company is now taking “steps to tighten our belts, including halting recruitment in certain businesses and discontinuing products and services where we believe our resources are spent elsewhere,” Olsavsky said.

He said the economic climate in Europe was worse in the quarter than in North America, because “the issues of the Ukraine war and the energy crisis have really become complicated in that geography.”

Amazon’s gloomy forecast doesn’t bode well for the holiday shopping period. Analysts are already gearing up for a dreary season, with online sales expected to grow only 2.5%, according to Adobe.

Amazon’s Prime Early Access sale, held earlier this month, could help juice up its year-end sales. Data gathered by third-party analysts indicated that the event may have been muted, as buyers feel inflationary pressures. Jassi said in the release that customer response to the new discount event and Prime Day held in July was “extremely positive”.

Amazon is rounding out a disappointing earnings week for Big Tech. Alphabet and facebook parent meta Both posted earnings that fell short of expectations as they were facing challenges in the digital advertising market. Microsoft Wasn’t immune, reporting lower-than-expected cloud revenue and weak quarterly guidance.

Apple, which also reported on Thursday, outperformed on earnings and revenue, but came up short in core product categories, including the iPhone business and services unit. The stock is trading lower after hours.

Amazon’s operating income fell nearly half to $2.53 billion from $4.85 billion a year earlier. Amazon Web Services generated $5.4 billion in operating income for all of the company’s profits as well as some as a cloud unit. Still, AWS reported its slowest revenue growth since 2014, when Amazon began breaking down results for the unit.

Amazon’s ad business was a bright spot in the results, bucking the trend of its digital advertising peers Facebook, Google and Snap, whose advertising businesses languished last year due to changes in the economic climate and Apple’s iOS privacy. Advertising revenue during the quarter rose 25% year over year to $9.55 billion, topping analysts’ estimates of $9.48 billion.

Amazon’s massive investment in electric-vehicle maker Rivian, which went public late last year, has caused analysts to take different approaches to their earnings per-share estimates. Amazon reported net income of $2.9 billion in the third quarter, which includes a profit of $1.1 billion in non-operating income from the Rivian stake. Over the past two quarters, the Rivian investment resulted in total losses of $11.5 billion.

watch: Amazon misses, stock falls

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