e-Commerce Giant Amazon Reports Q3 Earnings That Failed To Reach Analysts’ Expectations

Amazon has published its results for the third quarter of 2021 that were below expectations, indicating an underperformance in the quarter caused by a slow down in sales growth as customers returned to physical stores. The company said that it also faced supply chain challenges.

Amazon reported $6.12 earnings per share versus $8.92 estimated by analysts surveyed by Refinitiv. The company reported its revenue for the third quarter to be $110.81 billion compared to $111.6 billion expected by analysts. The revenue increased 15 percent over last year, but fell short of the prior quarter’s 27 percent growth rate. Still, it marks a fourth consecutive quarter of revenue topping $100 billion.

Sales in online stores increased by 3 percent from a year earlier to $49.9 billion, while physical store revenue increased 13 percent to $4.27 billion. Revenue from third-party seller services, which includes commissions on the marketplace as well as fulfilment and shipping fees, climbed 18 percent to $24.25 billion, a slowdown from 34 percent growth in the second quarter and 60 percent in the first.

Amazon’s revenue got a big push from its flagship Amazon Web Services cloud computing platform, which grew revenue by 39 percent to reach $16.1 billion, surpassing analysts estimate of $15.48 billion. For the first time ever, revenue from Amazon services surpassed its retail sales. Also, Amazon Services generated $4.88 billion in operating income in the period, while operating profit at the parent company was just $880 million. Net product sales were $54.9 billion in the quarter, while revenue from Amazon Web Services, advertising, third-party seller services and Prime subscriptions added up to $55.9 billion. Without the huge profit from Amazon Web Services, Amazon would have reported a loss for the quarter.

The company’s guidance for the current quarter was also rather disappointing. Amazon said its operating profit in the fourth quarter will be in the range of $0 and $3 billion —a significant step down from its operating profit of $6.9 billion in the year-ago period. Amazon forecast sales between $130 billion and $140 billion, representing growth between 4 percent and 12 percent. But analysts surveyed by FactSet were expecting revenue to rise 13.2 percent year-over-year to $142.1 billion. It also said that operating income could come in between breakeven and $3 billion, falling short of the $7.4 billion estimated.

Amazon said that it expects to incur several billion dollars of additional costs in its consumer business in the current quarter, as it navigates “through labour supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs —all while doing whatever it takes to minimize the impact on customers and selling partners this holiday season.” Amazon said earlier this month that it planned to take on 275,000 permanent and seasonal employees nationwide, in part to help deal with the holiday shopping scramble. The company has implemented measures to bolster its supply chain amid the global challenges, by adding new shipping ports and boosting its fleet of planes and trucks.

Following the announcement of its results for the third quarter of 2021 which were weaker than expectations, shares of Amazon dropped by more than 4.3 percent in extended trading on Thursday.