(Bloomberg) – Amazon.com Inc., shocking Wall Street, projected the slowest holiday quarter growth in company history, sending shares down about 11% on Friday morning.
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The Seattle-based company, which has made record profits during the pandemic, said sales in the current period will only rise 2% to 8% as buyers cut spending amid economic uncertainty. . Either figure would be the slowest increase on record for Amazon’s “Peak” season, which typically sees warehouse workers rush to ship orders on time. And the e-commerce giant’s other companies aren’t coming to the rescue. Amazon Web Services, the cloud computing division and the advertising unit each posted moderate revenue growth in the third quarter by their high standards.
“We are taking steps to tighten our belts,” Chief Financial Officer Brian Olsavsky said Thursday in a call with reporters after the earnings release. Olsavsky said Amazon would suspend hiring at certain businesses and reduce products and services in areas where the company determines its money would be better spent elsewhere.
The report, and subsequent share decline, pushed Amazon’s market value below $1 trillion. The e-commerce giant joins a long list of American companies to see their market values plummet in this year’s bear market.
The world’s largest online retailer had spent this year adjusting to a marked slowdown in e-commerce growth as shoppers returned to pre-pandemic habits. Amazon has delayed warehouse openings, frozen hiring in its retail group and halted experimental projects. Some investors had hoped that the company’s dominant market share in the United States and Europe, the massive scale of its logistics business and lower costs would shield Amazon from slowing consumer spending. Predictions suggest that is not the case, and Amazon has joined other previously high-flying tech giants such as Alphabet Inc. and Microsoft Corp. reporting disappointing results.
Asked how the shopping season looks ahead, Olsavsky said Amazon was “optimistic about the holidays, but we’re realistic that various forces are weighing on people’s wallets.”
Amazon forecast fourth-quarter revenue of $140 billion to $148 billion, well below analysts’ average estimate of $156 billion. Some independent sellers on Amazon’s website, who account for the majority of unit sales, are bracing for a tough holiday season. Adobe Inc. expects U.S. e-commerce sales in November and December to grow only 2.5% from a year earlier.
In the period ended Sept. 30, revenue grew 15% to $127.1 billion, Amazon said in a statement. Analysts had forecast sales of $127.6 billion. Earnings were 28 cents per share, down from 31 cents a year earlier, after adjusting for a 20-to-1 stock split that took effect in June.
Amazon said changes in exchange rates — primarily a strengthening U.S. dollar that made the company’s sales in other currencies less lucrative — reduced its revenue in the quarter by about $5 billion. The company expects these headwinds to continue through the current period, contributing to the weak forecast.
Despite CEO Andy Jassy’s pledge to cut costs, Amazon’s spending jumped nearly 18% to $125 billion. This is the fifth consecutive quarter that the company’s expenses have increased faster than revenue growth. The number of full-time and part-time employees increased by 5% to more than 1.54 million.
“The core of the e-commerce business has come under pressure from changing shopping habits following the boom seen during the pandemic and a consumer with less disposable income,” said Matt Britzman, analyst at Hargreaves Lansdown. “Clearly Amazon went too far, too soon, in its expansion plans and it had to put the brakes on, and then some to try to control costs.”
Spending on technology and content, a rough indicator of the company’s spending on research and development, as well as AWS, jumped 35%, the biggest jump since 2018. This partly reflects higher equity payouts that Amazon does to recruit and retain employees in a competitive market. for technologists.
Still, Amazon returned to profitability after two quarters of losses, posting a net profit of $2.9 billion. Earlier losses reflected the decline in value of the company’s roughly 17% stake in Rivian Automotive Inc. The electric carmaker’s shares fell sharply following an initial public offering in November 2021, but fell. stabilized in recent months.
AWS sales increased 27% to $20.5 billion. Analysts on average were forecasting $21 billion, according to data compiled by Bloomberg. It’s the weakest year-over-year growth for the cloud unit since Amazon began tracking the division’s performance dating back to 2014.
The backlog of cash that companies and governments have pledged to spend on the cloud unit in the future has reached $104 billion, although Amazon executives said business customers have also demanded the company to help them reduce their bills for the service.
Advertising unit revenue rose 25% to $9.5 billion, about half the growth rate it has posted on average since Amazon began reporting the division’s results. Online store revenue grew 7.1% to $53.5 billion.
–With the help of Spencer Soper.
(Updates with first paragraph trade)
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