Amazon issued bleak earnings forecasts for the rest of the year, sending its share price down as much as 20 percent in after-hours trading on Thursday.
The e-commerce and cloud group said it expected revenue of $140 billion to $148 billion for the October to December period, which includes the crucial holiday shopping period. Investors were expecting more than $155 billion, according to data from S&P Capital IQ.
Amazon projected that operating income for the current quarter could be between zero and $4 billion, compared with analysts’ estimates of $5 billion.
The results are the latest in a strong year for the company’s traditional core business of selling products online and bringing them to customers’ doorsteps. Quarterly revenue from Amazon’s online store had been declining since late 2021.
Third-quarter revenue was $127.1 billion, up 15% from the same period last year, but slightly below Wall Street expectations.
Amazon’s net income fell year-over-year to $2.9 billion from $3.2 billion a year ago and included a $1.1 billion increase in non-operating income from its stake in the manufacturer of Rivian electric vehicles.
Its share price had already fallen 35 percent since the start of the year before Thursday’s share price plunge, reflecting a broader market decline.
Amazon’s results were the latest in a dismal week for Big Tech stocks as macroeconomic pressures such as inflation weighed on the sector. “This is uncharted waters for many consumer budgets,” said Brian Olsavsky, Amazon’s chief financial officer.
Chief executive Andy Jassy said he had been “encouraged by the continued progress we are making in reducing costs across our store fulfillment network”.
But he added: “Obviously there is a lot going on in the macroeconomic environment, and we will balance our investments to streamline them without compromising our key long-term strategic bets.”
Amazon’s cloud business, which for much of the year has partially offset poor retail performance, saw worse-than-expected revenue growth and lower margins. Cloud revenue for the quarter was $20.54 billion, up 27.5% year over year. It was the first quarter in which the number has fallen below 30% since late 2020, and below analysts’ estimates.
The drive had suffered from companies looking to cut variable costs, Olsavsky said.
“We started to see a lot of customers reducing their bills, which we’re happy to help with,” he said. “It’s affecting short-term growth rates.”
While it did not announce a large-scale hiring freeze or sweeping cuts, Amazon has slowed hiring at some units and in recent weeks has moved to close experimental or underperforming projects such as its delivery robot concept, Scout.
Olsavsky said the company had been “very careful” in its corporate hiring. “We’re preparing for what could be a period of slower growth. We’re certainly looking at our cost structure and areas where we can save money.”
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It has also cut logistics costs after executives admitted earlier this year that they had over-increased warehouse rents and other infrastructure investments.
However, spending has continued to pace in its priority areas, such as the acquisition of sports and entertainment content for its Prime Video service, and the development of its healthcare operation. In July, Amazon announced it would acquire primary care provider One Medical in a deal worth $3.9 billion.
The disappointing results will cap a suboptimal first full year in charge of Jassy, who took over from founder Jeff Bezos in July 2021, as Amazon’s challenges appeared to be coming to an end.
“The odds in this economy tell you to batten down the hatches,” Bezos tweeted earlier this month.
Earlier on Thursday, Amazon’s e-commerce rival Shopify beat analysts’ expectations, posting a 22% year-over-year rise in revenue for the third quarter.
Shares in the Canadian group, which provides a software platform for online retailers, rose 17.3 percent on Thursday, despite warnings that a strong dollar and other macroeconomic pressures would be a drag on consumer spending.