Amazon Reports Third Quarter Results That Failed To Meet Estimates, Issues Weak Fourth Quarter Guidance

Amazon shares fell 13 percent in Thursday’s extended trading after the company reported a revenue miss and issued weak guidance for the fourth quarter. 

The company reported earnings of 28 cents per share for the third quarter. The company also reported third-quarter revenue of $127.10 billion, below the expectation of $127.46, according to Refinitiv. Amazon Web Services generated $20.5 billion, less than the expectation of $21.1 billion, according to StreetAccount. The company also generated $9.55 billion from advertising, surpassing the expectation of $9.48 billion from StreetAccount.

The company says it expects fourth-quarter revenue to come in between $140 billion and $148 billion. This will represent year-over-year growth of between 2 percent and 8 percent. Analysts expect fourth-quarter revenue of $155.15 billion, according to Refinitiv.

Although revenue fell short of Wall Street’s expectation, it grew 15 percent in the third quarter and made a double-digit return.

In a press release, the company’s CEO Andy Jassy said that “There is obviously a lot happening in the macroeconomic environment. And we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets.” The company’s finance chief Brian Olsavsky noted that Amazon cut its capital expenditures for the year by a third after it spent heavily over the last two years on things like strengthening its fulfillment and logistics network to deal with the increased demand that came with the pandemic. Amazon is now making efforts to “tighten our belt, including pausing hiring in certain businesses and winding down products and services where we believe our resources are better spent elsewhere,” CFO Brian Olsavsky said.

He also added that the economic environment in Europe was worse than that of North America in the quarter, saying that the “Ukraine war and the energy crisis issues have really compounded in that geography.”

Amazon’s operating income slid by almost half from $4.85 billion a year ago to $2.53 billion. Amazon Web Services (AWS) accounted for all of Amazon’s profit, as the cloud unit generated an operating income of $5.4 billion. This, however, is AWS’ slowest revenue growth since 2014. 

The company reported a net income of $2.9 billion in the third quarter, which includes a gain of $1.1 billion in non-operating income from its Rivian stake. In the prior two quarters, the Rivian investment resulted in total markdowns of $11.5 billion.

Revenue from advertising grew 25 percent year over year to $9.55 billion in the third quarter, beating estimates of $9.48 billion.