Amazon revenues grew at their slowest rate in six years during the third quarter and the company warned that growth would slow further still for the remainder of the year, as it contends with the mounting cost of keeping its logistics empire running at full tilt.
Overall revenues for the retail and cloud giant came in at $110.8bn for the quarter, up 15 per cent on the same period last year but its slowest rate of growth since 2015. Analysts had expected over $111bn.
Net income fell by almost half, year on year, to $3.2bn. Its shares fell more than 5 per cent in after-hours trading.
In its guidance for the current quarter, Amazon said it expected revenue growth to slow further, telling investors it expects revenues to come in 12 per cent higher than last year’s Christmas period at best, and at worst just 4 per cent.
Profits during that period could fall anywhere between zero and $3bn, the company said, compared to $6.9bn in 2020.
The pattern follows warnings issued by the company earlier in the year, when it said it would be difficult to match the performance of 2020 when surges in online buying led to record-breaking earnings. The impact of the pandemic has steadied somewhat with societies reopening.
Amazon is also contending with mounting costs in expanding its fulfilment networks, as well as hiring and retaining the employees to work in them.
Earlier this month it said it intended to add another 150,000 seasonal employees to handle the US holiday period — 50,000 more than it required last year. A tight jobs market has prompted the company to offer higher hourly pay and sign-on bonuses of up to $3,000 in some markets.
“We’ve always said that when confronted with the choice between optimising 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,” said Andy Jassy, Amazon’s chief executive. The quarter was his first in charge of the retail giant, having taken over from Jeff Bezos in July.
The bright spot in Amazon’s third quarter was its cloud computing division, AWS, which again performed strongly, posting revenues of $16.11bn versus expectations of around $15.5bn. The group again provided the lion’s share of Amazon’s overall profitability, with an operating income of $4.88bn, up almost 40 per cent year-over-year.
Amazon earnings at a glance
Actual versus estimates
Revenue: 110.8bn vs $111.55bn
Cloud revenue: $16.11bn vs $15.48bn
Net income: $3.2bn vs $4.67bn
Earnings per share: $6.12 vs $8.90
Source for estimates: Factset/StreetAccount and S&P Capital IQ