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Amazon Stock Drops 13% On Subpar Fourth-Quarter Forecasts

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Thursday’s extended trading saw a 13% decline in Amazon shares after the company released a dismal fourth-quarter forecast and missed revenue projections.

According to Amazon, it anticipates fourth-quarter revenue to be between $140 billion and $148 billion, up 2% to 8% from the same period last year. Refinitiv reports that analysts were anticipating sales to total $155.15 billion.

Although sales growth was back in the double digits in the third quarter with a 15% increase in revenue, Wall Street’s expectations were not met.

Amazon has had a difficult year thus far, much like the rest of Big Tech, as it deals with macroeconomic challenges, skyrocketing inflation, and rising interest rates.

a decline in Amazon’s primary retail business as customers started to shop again in physical stores.

It’s the second time this year that Amazon’s numbers have been so bad that they’ve caused a selloff to reach double digit percentages. A subpar second quarter projection in April caused the stock to decline by 14%.

Amazon has recently aggressively cut costs across many sectors as a response to rising costs under CEO Andy Jassy, who succeeded founder Jeff Bezos in July 2021. It reduced warehouse space, put a stop to a few experimental projects, shut down its telemedicine program, and put a recruiting freeze on corporate positions for its retail division.

The business invested extensively during the previous two years on things like expanding its fulfillment and logistics network to satisfy pandemic-related demand, according to Amazon CFO Brian Olsavsky, who said the company had reduced its capital expenditures budget for this year by a third.

The holiday shopping season won’t be helped by Amazon’s pessimistic prediction. With Adobe predicting that online sales will only climb by 2.5% this season, analysts are already bracing themselves for a lackluster campaign.

This month’s Amazon Prime Early Access Sale may have boosted year-end sales. The event may have been underwhelming, according to data gathered by independent analysts, as consumers feel the effects of inflation. In the press announcement, Jassy stated that customer feedback on the new discount event and Prime Day, which were both held in July, was “very positive.”

A terrible earnings week for Big Tech is coming to a close with Amazon. Alphabet
Facebook’s parent company Meta, Both companies reported earnings that fell short of projections as they dealt with difficulties in the digital advertising sector. Microsoft wasn’t exempt, announcing weaker-than-expected quarterly outlook and lower-than-expected cloud revenue.

Apple, which released financial results on Thursday as well, topped expectations for earnings and revenue but missed expectations in key product areas including the iPhone market and the services division. After hours, the stock is trading at a loss.

At Amazon, operating income dropped to $2.53 billion from $4.85 billion, roughly a half from the previous year. The cloud division’s operating income of $5.4 billion came entirely from Amazon Web Services, plus a little extra.

However, since Amazon started releasing separate earnings for the segment in 2014, AWS has experienced the worst revenue growth.

One encouraging aspect of the results was Amazon’s advertising division, which defied the trend of its digital advertising rivals Facebook, Google, and Snap, whose ad operations have suffered as a result of the economy and Apple’s iOS privacy regulations last year. During the quarter, ad revenue increased 25% year over year to $9.55 billion, easily surpassing analysts’ projections of $9.48 billion.

Due to Amazon’s sizable investment in electric vehicle manufacturer Rivian, which went public late last year, analysts have adopted various techniques to their predictions of earnings per share. In the third quarter, Amazon reported net income of $2.9 billion, which included a gain of $1.1 billion from its Rivian holding in non-operating income. The Rivian investment led to cumulative markdowns of $11.5 billion during the previous two quarters.

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