Amazon.com Inc. delivered its biggest-ever quarterly earnings in its 20-year history, but still came in well below analysts expectations, sending shares down to about 14 per cent in after-hours trading.
The online retailer recorded a quarterly profit of $482 million (A$680.69 million), or just $1 per share, which is well under the $1.56 number analysts were expecting. Amazon also missed Wall Street’s estimates on revenue expectations, registering $35.75 billion in revenue compared to the average estimate of $35.95 billion.
The results mark the third straight quarter in which the e-retailer has turned a profit. Amazon has, until recently, put nearly every dollar generated back into the business, which, according to Neil Saunders, CEO of global retail research agency Conlumino, is a “strategy that is working, and it is one that is accepted by the market.”
Amazon’s recent string of profitable quarters shows that the company can expand margins as its retail and Amazon web services platforms continue to generate nearly as much profit as the company’s entire North American e-commerce division.
Saunders said ‘Prime’ has been one of Amazon’s standout areas where membership continues to grow strongly. “In addition to the direct revenue it brings via the associated membership fees, ‘Prime’ has also proved to be an important way of locking in customer loyalty.”
This was important, says Saunders, because while the e-retailer is still a destination of choice for many online shoppers, it is facing increasing levels of competition from both traditional retailers moving aggressively into e-commerce and new online startups. “This is something underlined by the fact that despite its strong growth, Amazon’s share of all e-commerce sales in the US has fallen over the past five years.”
For the current quarter ending in March, Amazon said it is expecting a revenue in the range of $US26.5 billion to $US29 billion. Analysts surveyed by Zacks had expected revenue of $US27.47 billion.
The online retailer’s shares have declined 6.5 per cent since the beginning of 2016, while the Standard & Poor’s 500 index has fallen slightly more than 7 per cent.
Amazon’s stock hit $US632.20 in after-market trading on Thursday, which has more than doubled in the previous 12 months.
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