Amazon.com Inc’s efforts to get packages from warehouse to doorstep in a single day helped push the retail giant to its first year-on-year quarterly profit decline since early 2017 and the spending binge is not over.
Amazon chief financial officer Brian Olsavsky on Thursday said that the costs of the company’s one-day delivery push would be about US$1.5 billion during the fourth quarter.
Amazon’s forecasts for operating income and sales in the period fell short of analysts’ estimates and its shares slumped as much as 9.1 percent in extended trading.
Photo: Reuters
Amazon chief executive Jeff Bezos has promised since the company’s initial public offering to invest for the long haul and he is proving again his willingness to endure a little short-term pain in a bid to expand.
Facing slowing growth in its core e-commerce business, Amazon in April announced an initiative to cut the delivery window on millions of items for paying members of its Prime subscription program.
That has helped reinvigorate sales, if at a high price.
“Customers love the transition of Prime from two days to one day — they’ve already ordered billions of items with free one-day delivery this year,” Bezos said in a statement. “It’s a big investment and it’s the right long-term decision for customers.”
The investments taking place across Amazon’s warehouses are “strategically necessary,” but they “continued to weigh heavily” on the profitability of the retail business, Moody’s Investors Service analyst Charlie O’Shea said.
Third-quarter net income narrowed to US$2.13 billion, or earnings per share of US$4.23, from US$2.88 billion, or US$5.75, a year earlier, the Seattle-based company said in the statement.
It was the first year-on-year decline since the second quarter of 2017.
Analysts, on average, forecast earnings per share of US$4.59, data compiled by Bloomberg showed.
Amazon forecast operating income of between US$1.2 billion and US$2.9 billion in the fourth quarter compared with analysts’ estimates of US$4.31 billion.
Sales would be US$80 billion to US$86.5 billion in the holiday period, the company said. Analysts forecast US$87.2 billion.
Operating expenses during the third quarter climbed 26 percent, the steepest rise in more than a year, to US$66.8 billion. Shipping costs soared 46 percent to US$9.6 billion.
Delivery is hardly the only place Amazon is investing.
Amazon’s costs for technology and content — largely salaries related to employees in research and development, as well as infrastructure for Amazon Web Services (AWS) Inc data centers — jumped 28 percent to US$9.2 billion.
The company’s total workforce increased 22 percent to 750,000.
While the shares have gained 19 percent this year to close at US$1,780.78 in New York on Thursday, they have fallen 12 percent since the July 15 high of US$2,020.99.
Investors had bid up Amazon shares on growing profits driven by AWS, services for third-party sellers and advertising.
The cloud-computing unit remains Amazon’s cash cow.
Sales rose 35 percent to about US$9 billion in the third quarter. The unit’s operating income, US$2.26 billion, accounted for more than two-thirds of the total.
However, growth at AWS was the slowest since Amazon began breaking out the unit’s performance.
That is “absolutely” a concern for investors, D.A. Davidson & Co analyst Tom Forte said.
Amazon, which had a lengthy head start in building out a cloud-computing platform, faces steep competition from well-funded rivals such as Microsoft Corp’s Azure and Google’s Cloud Platform.
“You’re seeing some incremental competitive pressure from Microsoft” in particular, Forte said.
Revenue gained 24 percent to US$70 billion in the third quarter. Analysts had forecast US$68.7 billion.
MARKET LEADERSHIP: Investors are flocking to Nvidia, drawn by the company’s long-term fundamntals, dominant position in the AI sector, and pricing and margin power Two years after Nvidia Corp made history by becoming the first chipmaker to achieve a US$1 trillion market capitalization, an even more remarkable milestone is within its grasp: becoming the first company to reach US$4 trillion. After the emergence of China’s DeepSeek (深度求索) sent the stock plunging earlier this year and stoked concerns that outlays on artificial intelligence (AI) infrastructure were set to slow, Nvidia shares have rallied back to a record. The company’s biggest customers remain full steam ahead on spending, much of which is flowing to its computing systems. Microsoft Corp, Meta Platforms Inc, Amazon.com Inc and Alphabet Inc are
Luxury fashion powerhouse Prada SpA has acknowledged the ancient Indian roots of its new sandal design after the debut of the open-toe footwear sparked a furor among Indian artisans and politicians thousands of miles from the catwalk in Italy. Images from Prada’s fashion show in Milan last weekend showed models wearing leather sandals with a braided design that resembled handmade Kolhapuri slippers with designs dating back to the 12th century. A wave of criticism in the media and from lawmakers followed over the Italian brand’s lack of public acknowledgement of the Indian sandal design, which is named after a city in the
The US overtaking China as Taiwan’s top export destination could boost industrial development and wage growth, given the US is a high-income economy, an economist said yesterday. However, Taiwan still needs to diversify its export markets due to the unpredictability of US President Donald Trump’s administration, said Chiou Jiunn-rong (邱俊榮), an economics professor at National Central University. Taiwan’s exports soared to a record US$51.74 billion last month, driven by strong demand for artificial intelligence (AI) products and continued orders, with information and communication technology (ICT) and audio/video products leading all sectors. The US reclaimed its position as Taiwan’s top export market, accounting for
NEW MODELS: AI researchers are facing challenges in managing deceptive behaviors, with limited regulation and testing, as the race for advanced models intensifies The world’s most advanced artificial intelligence (AI) models are exhibiting troubling new behaviors — lying, scheming and even threatening their creators to achieve their goals. In one particularly jarring example, under threat of being unplugged, Anthropic PBC’s latest creation, Claude 4, lashed back by blackmailing an engineer and threatening to reveal an extramarital affair. Meanwhile, ChatGPT creator OpenAI’s o1 tried to download itself onto external servers and denied it when caught red-handed. These episodes highlight a sobering reality: More than two years after ChatGPT shook the world, AI researchers still do not fully understand how their own creations work. Yet the race to
RSS