Amazon Shares Fall More Than 6% After Hours as Third-Quarter Results Miss Expectations Despite AWS Growth
Amazon reported net sales of $201.94 billion and earnings of $1.89 per share for the third quarter, both below Wall Street expectations, while its cloud unit grew 39.3% and the company kept its $220 billion capital spending plan for the year.
Amazon shares fell more than 6% in after-hours trading on Thursday after the company reported third-quarter results below Wall Street expectations, even as its cloud computing business grew at its fastest pace in nearly five years.
The Seattle-based company reported net sales of $201.94 billion for the quarter, up 12% from $180.17 billion a year earlier. Net income was $20.69 billion, or $1.89 per share, compared with $21.19 billion, or $1.95 per share, in the same period last year. Analysts had expected $1.97 per share on sales of $202.2 billion, according to FactSet. The stock had already closed the regular session at $243.79, down 4.25% on the day, before the report.
AWS grew at its fastest pace in nearly five years
Sales in Amazon Web Services rose 39.3% to $46.0 billion, up from a 37% growth rate in the prior quarter. The cloud unit accounted for about 63% of the company’s operating profit, according to The Motley Fool. Operating income for the company as a whole rose to $28.1 billion from $17.4 billion a year earlier.
The report came a day after Alphabet shares fell after its own third-quarter earnings miss, adding to a week of pressure on large technology stocks tied to heavy spending on artificial intelligence.
Holiday outlook and the cost of building for AI
For the fourth quarter, Amazon said it expects net sales of $240 billion to $247 billion, a rise of 12% to 16% from a year earlier. Analysts had expected $244.16 billion, according to Transport Topics. The company said earlier this month that it would hire 300,000 seasonal workers in the United States for the holiday period, up from 250,000 last year.
The spending behind the cloud growth remains large. Amazon kept its plan to spend about $220 billion on capital projects this year, up from a $200 billion plan announced in February and from $128 billion in capital spending last year. Chief Executive Andy Jassy had said in July that the spending covers robots, semiconductors and satellites, and that higher memory chip costs were the main reason for the increase. Jassy also said at the time that even at the $220 billion level, Amazon would not have enough capacity to meet all demand this year.
Free cash flow over the past 12 months was an outflow of $42.4 billion, compared with an inflow of $14.8 billion a year earlier, according to The Motley Fool. Long-term debt has nearly tripled since December to about $173 billion, and quarterly interest expense more than tripled to $1.7 billion.
Reporting based on coverage by Transport Topics and The Motley Fool.
