Amazon Q3 results fall short of expectations as online sales slow after pandemic wave

Amazon (AMZN) released third quarter sales and earnings results that beat Wall Street estimates, reflecting a deceleration in growth after the pandemic stoked a surge in online shopping last year and earlier in 2021.

The company also reported that it would incur additional costs due to supply chain issues in the fourth quarter. Stocks fell more than 4% at the end of the session.

Here are the main metrics from Amazon’s report, compared to consensus estimates compiled by Bloomberg:

  • Income: $ 110.8 billion vs. $ 111.81 billion expected, $ 96.15 billion year-on-year

  • Earnings per share: $ 6.12 vs. $ 8.96 expected, $ 12.37 over one year

Sales at Amazon’s major online stores fell short of expectations in the third quarter, which contributed to the overall revenue slowdown. E-commerce sales rose 3% from a year ago to $ 49.94 billion, a missing estimate of $ 51.53 billion.

At $ 110.8 billion, Amazon’s overall sales were up 15% from a year ago, a marked slowdown from the 27% growth rate in the previous quarter. Still, it was a fourth consecutive quarter of revenue exceeding $ 100 billion.

Amazon’s results were boosted by its flagship cloud computing platform Amazon Web Services, which increased revenue by 39% to $ 16.1 billion. This high-margin business has consistently outperformed Amazon’s huge e-commerce unit, and its growth rate in the third quarter showed a surprising acceleration from the second. And revenue for Amazon’s “other” business unit – which primarily includes ad sales – grew 49% from a year ago, matching its rate in the same quarter of 2020.

Wall Street, however, relied on Amazon’s guidance for the fourth quarter, which included expectations of increased costs due to global supply chain shortages and freight concerns.

Amazon boxes are seen stacked for delivery in New York’s Manhattan neighborhood on January 29, 2016. REUTERS / Mike Segar / File Photo

“In the fourth quarter, we expect to incur billions of dollars in additional costs in our consumer business as we deal with labor shortages, rising labor costs, global supply chain issues and increased freight and shipping costs, while doing whatever it takes. to minimize the impact on customers and business partners this holiday season, ”Amazon CEO Andy Jassy said in the company’s earnings release. “It will be expensive for us in the short term, but it is the right priority for our customers and partners.”

For the current quarter, Amazon said it expects net sales to reach $ 140 billion, missing estimates of nearly $ 142 billion, based on Bloomberg consensus data. He also said operating profit could be between breakeven and $ 3 billion, well below the estimated $ 7.4 billion.

The commentary and advice appeared to justify investor concerns about the near-term challenges for Amazon as rising input costs and supply chain challenges trickle down to the global economy. Labor costs and shortages were also central concerns, as the company further stepped up its hiring plans in the third quarter. Last month, Amazon announced plans to hire an additional 125,000 processing and transportation workers at an average rate of $ 18 per hour, in addition to the 40,000 other corporate employees it said it was working on. would add a few weeks earlier. Overall, the company has added more than 450,000 workers in the United States since the start of the pandemic.

Amazon stock has underperformed the market since its last earnings report in July, when the company previously offered disappointing third-quarter sales forecasts compared to Wall Street expectations. At the time, Amazon management attributed the deceleration to difficult comparisons to last year’s results, which had been boosted by lockdowns linked to the pandemic.

Amazon shares fell 4.3% from July 29 to Thursday’s close, lagging behind the S&P 500’s 4% gain during that time frame.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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David A. Albanese