Amazon posts mixed quarterly results as cloud growth offsets cautious holiday forecast
AWS sales rose 39.3%, but third-quarter revenue and profit missed analyst estimates and Amazon's holiday-quarter guidance came in below expectations.
At a glance
- Amazon's third-quarter net income was $20.69bn, or $1.89 a share, below analyst expectations of $1.97 a share.
- AWS sales rose 39.3%, the cloud unit's fastest growth in nearly five years, but Amazon shares fell over 6% after hours.
- Amazon guided fourth-quarter sales to $240bn-$247bn, under the $244.16bn analysts expected, as AI-driven capital spending reaches $220bn.
Amazon reported a mixed picture of its financial health on Thursday, with fiscal third-quarter revenue and profit falling short of Wall Street expectations and a cautious forecast for the holiday quarter, even as its cloud computing unit posted its fastest growth in nearly five years.
The Seattle-based company reported net income of $20.69bn, or $1.89 per share, for the quarter ended 30 September, down from $21.19bn, or $1.95 per share, a year earlier. Sales rose to $201.94bn, compared with $180.17bn in the same period a year ago. Analysts had expected $1.97 per share on sales of $202.2bn, according to FactSet.
Shares fell more than 6% in after-market trading when the results were released, as investors focused on the core business.
Cloud growth, holiday caution
Sales in Amazon's cloud computing unit, AWS, rose 39.3% during the quarter, up from 37% in the previous quarter and the unit's fastest growth rate in nearly five years, the company said.
For the fourth quarter, which covers the critical holiday shopping period, Amazon said it expects net sales of between $240bn and $247bn, a 12% to 16% increase compared with the year-ago period. Analysts were expecting $244.16bn.
The company said earlier this month that it would hire 300,000 US seasonal workers for the shopping period, up from 250,000 last year.
AI spending in focus
Investors have been closely watching Amazon's quarterly earnings for signs that its heavy spending on artificial intelligence is starting to pay off. CEO and president Andy Jassy told investors in July that the company now expects capital spending, mostly on AI and including robots, semiconductors and satellites, to total $220bn for this fiscal year. That is up from the $200bn plan announced in February and well above the $128bn in capital spending for all of last year. Jassy cited the higher cost of memory chips as the main reason for the increase, and said that even at the $220bn level Amazon will not have enough capacity to meet all of its customers' demands this year.
Worries about AI spending are weighing on the wider industry. Alphabet's latest earnings report late on Wednesday raised alarm bells when it reported weaker summer growth than analysts expected. The company behind Google and YouTube also said it burned through more cash on a measure called free cashflow after its purchases of property and equipment topped $51bn, and its stock plummeted on Thursday, erasing half a trillion dollars from its total value.
Source: The Guardian Business.
Questions and answers
- Did Amazon beat earnings expectations?
- No. Amazon reported net income of $1.89 per share on sales of $201.94bn for the quarter ended 30 September, below analyst expectations of $1.97 per share on sales of $202.2bn, according to FactSet.
- How fast is Amazon's AWS cloud business growing?
- Sales in Amazon's cloud computing unit, AWS, rose 39.3% in the latest quarter, up from 37% in the previous quarter. Amazon said that was its fastest growth rate in nearly five years.
- How much is Amazon spending on artificial intelligence?
- CEO Andy Jassy said in July that Amazon expects capital spending, mostly on artificial intelligence, to total $220bn this fiscal year, up from $128bn last year and a $200bn plan announced in February.
