Amazon posts disappointing Q3 results, but AWS continues to grow

Amazon Web Services posted operating income more than three times larger than Amazon's North American e-commerce business.

Amazon on Thursday posted its third quarter results, posting earnings far below market expectations. Amazon Web Services, however, continued to grow at a rapid clip.

Overall, Amazon's net income came to $252 million in the third quarter, or 52 cents a share. Revenue came to $32.7 billion. In the same quarter last year, Amazon reported earnings of 17 cents a share on $25.36 billion in revenue.

Wall Street was looking for earnings of 78 cents a share on revenue of $32.69 billion.

Operating income was $575 million in the third quarter, compared with $406 million in third quarter 2015.

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Amazon Web Services earned $3.231 billion in revenue, up nearly 55 percent year-over-year. Its operating income came to $861 million -- more than three times the operating income of Amazon's North American e-commerce business, which came to $255 million. Meanwhile, its international business lost $541 million.

Amazon CFO Brian Olsavsky stressed on a conference call Thursday that the retail segment of the business was not as strong this quarter because it was spending money ahead of the holiday season. Amazon added 18 fulfillment centers over the quarter, the first time in years Amazon added more than 10 centers in one quarter.

Olsavsky also highlighted ways Amazon continues to invest in AWS as competition from companies like Google grows. Tools like the Database Migration tool and AWS Schema Conversion tool help companies move from on-premise or hybrid environments to AWS, he noted. And of course, AWS recently announced its partnership with VMWare.

"We'll continue to react to customer needs, and that will include opening up new regions," Olsavsky said.

After opening its Ohio region, AWS now operates 38 availability zones across 14 technology infrastructure regions globally, and plans to open an additional nine availability zones in four regions (Canada, the UK, France, and a second region in China) in the coming months.

For the fourth quarter outlook, Amazon forecast net sales between $42 billion and $45.5 billion. The company gave a wide range for its projected operating income: between $0 and $1.25 billion.

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