Amazon.com Inc. reported its first quarterly profit decline in more than two years, missing analysts’ estimates, amid higher spending to speed package delivery. Shares fell more than 7% in extended trading.
Third-quarter earnings were $4.23 a share, compared with $5.75 in the period a year earlier, the Seattle-based company said Thursday in a statement. Analysts, on average, estimated $4.59 a share, according to data compiled by Bloomberg. Amazon projected operating income of $1.2 billion to $2.9 billion in the current quarter compared with analysts’ estimate of $4.31 billion.
Investors have been keeping a close watch on Amazon’s spending plans as the company tries to meet a pledge to expand one-day delivery for members of its Prime program, and invests in more capacity for the Amazon Web Services cloud-computing group. The ramped up spending this year curbed investor enthusiasm for Amazon, whose shares had neared records as recently as July on growing profits driven by AWS, services for third-party sellers and advertising.
Chief Executive Officer Jeff Bezos said that Prime subscribers had placed orders for one-day delivery on billions of items so far this year. That didn’t come cheap.
Operating expenses during the third quarter climbed 26%, the steepest rise in more than a year, to $66.8 billion. Shipping costs soared 46% to $9.6 billion. Amazon’s costs for technology and content — largely salaries related to employees in research and development and infrastructure for AWS data centers — jumped 28% to $9.2 billion. The company’s workforce increased 22% to 750,000 people.
Amazon’s forecast for the all-important holiday quarter gave investors more to worry about. The company projected revenue of $80 billion to $86.5 billion, falling short of the average analyst estimate of $87.1 billion, and suggesting the difficulty of sparking growth to the levels seen in the company’s past few years.
Amazon also is facing increasing regulatory scrutiny, as the Department of Justice and Federal Trade Commission examine the practices of the largest U.S. technology companies. Amazon has so far avoided fines of the sort levied by the FTC on Facebook Inc. and by the European Commission on Alphabet Inc.’s Google, but investors are weighing the risks should the spotlight stay on the company. President Donald Trump and Democratic presidential hopefuls alike have publicly criticized Amazon.
While the stock gained 19% this year to close at $1,780.78 in New York, it has fallen 12% since its July 15 high of $2020.99.
Revenue gained 24% to $70 billion in the period ended Sept. 30. Analysts projected $68.7 billion.
Net income narrowed to $2.13 billion, from $2.88 billion a year earlier, the first year-over-year decline since the second quarter of 2017.