Amazon fails to impress investors with its balance sheets.
(Photo: dpa)
The world’s largest online retailer Amazon has surprised investors with a weak sales forecast for the Christmas quarter. The group expects revenues of between 140 billion and 148 billion dollars, as announced on Thursday.
Analysts had expected significantly more. The share price fell by more than 20 percent in after-hours trading. The profit forecast – Amazon is promising a result between zero and 4.0 billion dollars – was disappointing.
Chief Financial Officer Brian Olsavsky announced that Amazon will save more in the future: “As at similar times in our history, we have taken steps to tighten our belts, including a hiring freeze in certain areas of the business.”
In addition, Amazon plans to discontinue some products and services, Olsavsky said. He did not name specific products. “Our goal is to find the right balance between long-term investments for our customers while improving operational efficiencies.”
Top jobs of the day
Find the best jobs now and
be notified by email.
In the past third quarter, Amazon earned $2.9 billion. In the corresponding period last year, it was still 3.2 billion dollars. Sales grew 15 percent to $127.1 billion, but also fell short of market expectations.
Cloud division AWS behind expectations
Most recently, the important cloud division AWS had been a sales and profit driver for the company. In both areas, however, the subsidiary fell short of analyst forecasts in the past year.
AWS reported the lowest growth rate for the division in company history. Amazon has been breaking down growth numbers for the cloud business since 2014.
In the past quarter, AWS sales increased by 27.5 percent year-on-year to $20.5 billion. However, analysts had expected around a billion dollars more in sales.
AWS accounts for around 16 percent of Amazon’s total sales. The division’s operating income was $5.4 billion. Analysts had expected just under $ 6.4 billion.
The cloud division is actually a profit driver for the company.
(Photo: Reuters)
Amazon is the global market leader in the cloud business. But the company is losing market share. At least that’s what market researcher Gartner estimates. According to this, AWS’ global market share in 2021 was 39 percent, after 41 percent in the previous year. On the other hand, the rivals Google and Microsoft have caught up in terms of market share.
AWS business customers are currently pushing to pay less money for their services, Olsavsky said. “We work with customers to lower their bills.”
Olsavsky continued: “Like all companies, they want to reduce their expenses when faced with uncertainty in the market.” Olsavsky left open whether AWS offers discounts to retain customers.
Amazon loses in classic mail order
Hargreaves Lansdow analyst Matt Britzman called Amazon’s results disappointing. Investors are particularly “concerned about the forecast for the fourth quarter, which is traditionally the most important quarter for e-commerce”. Amazon pushed its expansion “too early and too hard” during the pandemic and then had to “pull the brakes to get costs under control.
In the USA, Amazon also lost money in traditional mail order business in the third quarter this time: the bottom line was an operating loss of 412 million dollars, where a year ago a profit of 880 million dollars was recorded. In international business, the loss has almost tripled to around $2.5 billion.
Only the advertising business is really positive at the moment. Amazon was able to increase sales by a quarter to $9.55 billion. That was more than analysts had expected.
Julian Skelly from the consulting firm Publicis Sapient can therefore also take something positive from the results: “Although Amazon has had a difficult year 2022, the results of the third quarter show the strength of a diversified company,” comments Skelly.
With agency material.
More: Microsoft numbers: Strong cloud sales meet weak forecast