Amazon saw its sales spring back over the summer, it reported Thursday, after it had struggled with flagging growth and lower profits in the past year. But the company predicted a rough upcoming holiday season, forecasting underwhelming sales growth and the possibility of making zero profit.
Shares of Amazon tanked in early after-hours trading, down 18% at $91.20. Besides the gloomy outlook, the company’s profits from online shopping faltered because of growing expenses in North America and a sales slump internationally.
In the third quarter, which included Amazon’s Prime Day shopping event in July, net sales rose 15% to $127.1 billion, just missing the $127.5 billion average analyst estimate from a survey by Refinitiv. The company posted a profit of 28 cents per share, beating Wall Street’s expectation of 22 cents per share.
But Amazon predicted that in the final quarter of the year, which includes the all-important holiday shopping season, its sales would rise to between $140 billion and $148 billion — far below Wall Street’s expectation of a stronger rebound to $155.15 billion in sales. And the company said its operating income in the fourth quarter could range from breakeven to a $4 billion profit, also below expectations.
Amazon chief financial officer Brian Olsavsky told reporters that the company is still “bullish” on the holiday season but wants to be cautious in its predictions. Amazon has items in stock at a higher rate and delivery speeds are faster than during heightened pandemic demand, he said. Nonetheless, challenging economic conditions are likely to hit sales, he said.
“We are prepared for what could be a slower growth period,” Olsavsky said, “like most companies.”
Amazon is the latest in a parade of Silicon Valley giants to report weak results. Earlier this week, Google parent Alphabet reported slumping business, with its advertising powerhouse YouTube experiencing its first decline in revenue since the company started disclosing figures for it. Meta reported its second-straight decline in revenue, as well as profit nearly half what it was a year earlier. Combined with worrying reports from the likes of Microsoft and Snap, the latest financial snapshots from companies like Amazon are painting a sobering picture of the economy.
In Amazon’s third-quarter report, its balance sheet was affected by its stake in electric-vehicle maker Rivian, which added $1.1 billion to the company’s profits. Operating income, which measures profit without including Amazon’s investment in Rivian, nearly halved to $2.5 billion from $4.9 billion in the summer months of 2021.
Financial analysts had predicted that Amazon’s decision to hold Prime Day in July would help it grow sales compared to the same quarter last year. In 2021, Amazon had held Prime Day in June. Amazon has increasingly relied on its discount bonanza to boost sales, and held a second markdown event in October just after announcing a new slate of its smart home products.
The company is weathering lower spending by shoppers at a time when its logistics operation have become more expensive to operate. Amazon built out its warehousing and air hub capacity to respond to early-pandemic levels of demand, but was stuck operating this infrastructure when sales fell.
