stock is heading lower after the e-commerce and cloud giant reported disappointing third-quarter financial results and a weaker-than-expected outlook for the fourth quarter. The company’s results were weighed down by a series of factors, including tough comparisons with the surge in online shopping during the pandemic, ongoing product shortages, higher wage costs, increased shipping expenses, and further investment in the company’s fulfillment operations.
For the third quarter, Amazon (ticker: AMZN) reported sales of $110.8 billion, up 15% from a year ago, in line with its guidance range of $106 billion to $112 billion, but slightly below the Wall Street consensus at $111.6 billion. Operating income was $4.9 billion, also in the middle of its guidance range of $2.5 billion to $6 billion. The company earned $6.12 a share in the quarter, well shy of the Street consensus of $8.92 a share.
The company explained the miss in unusually frank terms in its earnings announcement: “We’ve always said that when confronted with the choice between optimizing for short-term profits versus what’s best for customers over the long term, we will choose the latter—and you can see that during every phase of this pandemic,” Amazon CEO Andy Jassy said in a statement. Referring to a host of challenges heading into the holiday season, Jassy added that the company will do “whatever it takes to minimize the impact on customers and selling partners this holiday season. It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”
For the fourth quarter, Amazon sees revenue ranging from $130 billion to $140 billion, up 4% to 12%. Wall Street analysts have been expecting fourth-quarter revenue of $142 billion. Amazon sees operating income in the quarter range from break-even to $3 billion, again below expectations, which averaged $7.7 billion.
Online stores revenue was $49.9 billion, up just 3% from a year earlier, and falling shy of the Wall Street consensus at $51.3 billion. Third-party services revenue at $24.2 billion met expectations. Revenue from Amazon Web Services was $16.1 billion, up 39%, and above Street estimates at $15.5 billion. Subscription revenues were $8.1 billion, just ahead of expectations. Other income, including advertising, was $8.1 billion, fell well short of the Street consensus view at $10.3 billion. Physical stores revenue was $4.3 million, up 13% from a year earlier.
Amazon shares are down 5% in premarket trading, to $3,275.71.
Write to Eric J. Savitz at [email protected]