Business 3 min read By Trevor Kendall
Amazon shares fall after third-quarter earnings miss expectations
Amazon shares dropped sharply in after-hours trading after the company reported third-quarter earnings below Wall Street forecasts, even as revenue rose 12 percent.
Amazon shares fell as much as 9 percent in after-market trading Thursday after the tech giant reported third-quarter earnings below Wall Street analysts’ expectations. The company posted earnings of $1.89 per share on a diluted basis, down from $1.95 in the same quarter a year earlier, while total revenue climbed 12 percent to $201.9 billion.
The gap between the reported figures and the consensus forecast was the central reason for the reaction. Analysts had expected a stronger profit result, and the shortfall was large enough to trigger a sharp move in extended trading even though the top line continued to expand at a double-digit pace. For a company of Amazon’s size, a 12 percent revenue increase is a solid result, but investors have shown they expect profit per share to keep pace with sales.
The results came at a time of broader pressure on large technology stocks. Investors have been pulling back from the sector, and Amazon’s miss added to a wider sell-off across major tech companies. Traders have been reassessing valuations for the largest firms as earnings growth slows and spending on artificial intelligence and infrastructure continues to rise, raising questions about how quickly those investments will translate into profit.
Advertising, one of the company’s fastest-growing businesses, was a key source of concern. Amazon reported slower growth in its advertising revenue during the quarter. The company pointed to two factors: its decision to host Prime Day for most larger countries in the second quarter, which moved some promotional activity out of the third quarter, and a shift in foreign exchange rates. Together, those factors contributed to a softer report than Wall Street had anticipated.
Analysts have been watching the advertising sector closely over the past several quarters, looking for signs of whether the strong rebound in digital ad spending would hold. Amazon’s slower third quarter suggests the company’s ad business, which has become a significant contributor to overall profits, is operating in a more mixed environment than it did earlier in the year. Because advertising margins are generally higher than those of retail sales, any slowdown in that segment draws particular attention from investors.
Amazon’s retail and cloud operations are the other pillars of its results, and the quarter’s revenue growth reflected demand across the company’s businesses. However, the market’s focus on Thursday centered on the earnings line and the advertising slowdown rather than on the top-line figure. That split between a healthy headline revenue number and a disappointing profit result is what made the after-hours decline so pronounced.
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