Amazon's Prime Day boost couldn't save it from disappointing sales

27 October, 2018, 03:59 | Author: Sally Reid
  • Amazon sinks as revenue growth disappoints

Amazon's global sales grew at just 13% to $15.5 billion, compared to a growth of 29% a year ago. It meant Amazon was surpassed by Microsoft as the world's second most-valuable company.

Amazon followed up its milestone second quarter, in which profits topped $2 billion for the first time, with a more mixed third-quarter report.

Worldwide net sales came to $15.55 billion, up 13 percent, with an operating loss of $494 385 million. The AWS segment isn't slowing down, either. Google's other revenue, which includes its cloud business, grew 29 percent on year, 4 percent below estimates of Cowen & Co. analysts.

While Amazon's sales forecast missed estimates, US shoppers are projected to increase their online spending by as much as 22 per cent this holiday season, according to Deloitte Insights.

Shares in Alphabet fell about 6 per cent, knocking about $45 billion off its market value after it fell short on sales after beating estimates for the past eight quarters.

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The company now groups its advertising group under "other" on its balance sheet. The growth is likely coming from Amazon's cloud business, its burgeoning advertising business, and its third-party sellers marketplace.

Net sales are expected to be between $66.5 billion and $72.5 billion, or to grow between 10% and 20% compared with fourth quarter 2017. Amazon said revenue was hurt by foreign exchange rate changes. Earnings from the segment surged to $2 billion from just $112 million in the third quarter a year ago.

That was less than forecast, and investors were also disappointed at Amazon's predictions for revenue and profit in the busy period leading up to Christmas.

There were no ratings downgrades from the Wall Street analysts who have nearly universally backed the companies' long-term prospects, but several said there were signs that both were beginning to face tougher competition from tech peers as well as the retail companies Amazon has bullied in recent years.

The weaker than expected third quarter results and guidance prompted analysts to cut fourth quarter revenue estimates. Amazon India registered its best-ever performance in festive sales, which is usually dominated by Flipkart's flagship event, The Big Billion Days sale. In the holiday period a year ago, Amazon saw sales of $60.5 billion. Another contributor, Amazon-Business is now hitting a $10 billion yearly run rate. As Amazon continues to surge thanks to more consumers spending more online, traditional retailers like Toys R Us and Sears have fallen into bankruptcy protection.

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