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Amazon stock slips 9% despite record profit

Posted at 5:34 PM, Oct 25, 2018
and last updated 2018-10-25 18:48:09-04

For years, investors waited eagerly for the era when Amazon would finally turn profits consistently. Now, even a record quarterly profit isn’t enough for Amazon to impress Wall Street.

Amazon on Thursday reported a $2.9 billion profit for the three months ending in September, marking its largest profit to date and the fourth consecutive quarter in which profits topped $1 billion.

However, Amazon’s sales for the quarter and its sales forecast for the upcoming fourth quarter both came in below Wall Street estimates. Amazon stock fell as much as 9% in after hours trading following the earnings results.

The company’s sales hit $56.6 billion for the quarter, a gain of nearly 30% from the same period a year ago, but just shy of the consensus estimate among analysts. Amazon also said it expects sales for the fourth quarter to be between $66.5 billion and $72.5 billion, also below analyst estimates.

The narrow sales miss come amid broader market jitters that sent tech stocks briefly into correction territory earlier this week. The market has suffered turbulence this month amid concerns about rising interest rates and an escalating trade war with China.

“Amazon continued to demonstrate that its various investments are resonating with its very broad and fast-growing customer base, with impressive results across the board,” Charlie O’Shea, Moody’s lead retail analyst, said in a statement.

On a conference call with analysts Thursday, Amazon CFO Brian Olsavsky credited the surge in profits to “strong growth” in two key divisions: Amazon Web Services and Amazon’s nascent advertising business.

Amazon Web Services, which remains the leader in the fast-growing cloud computing market, saw sales jump 46% from the prior year to $6.7 billion. Amazon’s other segment, which is largely made up its advertising business, saw sales more than double to $2.5 billion.

The billion-dollar profit streak puts the company in a stronger position to invest and compete in costly new markets, including healthcare, entertainment and groceries. It also may buoy the company as it raises the minimum wage to $15. On the conference call, Olsavsky said the minimum wage hike would impact “just under” 400,000 workers in the US and UK.