Amazon earnings: A disappointing quarter sends stock plummeting

Amazon earnings: A disappointing quarter sends stock plummeting

Summary: Amazon records a big miss for its second quarter, disappointing Wall Street with dismal earnings.


Online retail giant Amazon reported disappointing second quarter earnings, coming in well below Wall Street's expectations. Shares of Amazon tanked immediately, dropping by as much as 15 percent in the minutes following the release of the earnings report.

For the quarter, the company reported net income of $207 million, or 45 cents per share, on sales of $6.57 billion. Wall Street had been expecting earnings of 53 cents a share on revenue of $6.54 billion.

Still, CEO Jeff Bezos remained upbeat. In a statement, he said:

We're seeing rapid growth in Kindle, Amazon Web Services, third-party sales, and retail. We're also encouraged by what we see in mobile. In the last twelve months, customers around the world have ordered more than $1 billion of products from Amazon using a mobile device. The leading mobile commerce device today is the smartphone, but we're excited by the potential of the new category of wireless tablet computers. Over time, tablet computers could become a meaningful additional driver for our business.

As expected, Amazon did not disclose sales figures for the Kindle e-reader, which saw a price drop during the quarter. On a call with analysts, the company said consumers are buying more books via the Kindle app but that the company is seeing "strong growth" on the Kindle and the app "across the board."

The company said earlier this month that is now selling more Kindle books that hardcover books, at nearly a 2:1 ratio. However, on the call, the company said physical books are growing by double-digits, as well, and that the company is "extremely pleased" with the overall books business.

Revenue from the media side of the business grew 18 percent year-over-year, while electronics and other general merchandise jumped 69 percent from a year ago.

Operating expenses were up 40 percent to $6.3 billion due, in part, to an increased investment in fulfillment costs, from $409 million a year ago to $582 million. The company is adding 13 fulfillment centers this year and hired 2,200 people during the quarter.

On the media side, the company did report some sequential declines due, in part, to the seasonality of textbooks, as well as some weaknesses in video games and consoles, citing a lack of major releases as a driver. Overall, worldwide media sales grew 18 percent to $2.87 billion while worldwide sales of electronics and other general merchandise grew 69 percent to $3.49 billion.

The company was also asked about what it's seeing in consumer sentiment as the company looks ahead toward the holiday season and whether it's improved. Executives said they didn't consider themselves a bellweather of the industry but that the quarterly results indicated strong growth.

Looking ahead, the company said it expects third-quarter sales to be between $6.9 billion and $7.6 billion. Wall Street is expecting eps of 60 cents on sales of $7.14 billion.

Shares of Amazon were up more than 2 percent in regular trading, closing at $120.07

Topics: Enterprise Software, Amazon, Banking

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  • As fewer people have money to spend, it's not a very surprising revelation,

    now is it? ;)

    A friend who works in a job placement program has seen employment swing upward, but not at the wages people used to get. So won't be seeing as many profits and, worse, will probably be asking for bailouts in a year or two - maybe they can get the money from Barnes & Noble and Borders, the only remaining brand booksellers, as those two used price wars to nix all the small business bookstores... then came amazon and did a one-up as well...

    Until real wages make a comeback, companies will have to resort to more layoffs and other false means to show "profits" and "earnings" for shareholders to drool over. Nobody's spending, so the only other way to look big is to drop wages and/or workers.

    • How do you explain Apple?

      They seem to be doing OK these last couple of years. :)
      John Zern
  • RE: How do you explain Apple?

    emotional based behaviors always trump rational ones.