Amazon shares plunged over 20% in after-hours trading Thursday following a report that missed on sales and revenues for its Amazon Web Services (AWS) cloud business as well as offered lower than expected fourth quarter guidance.
The report showed revenues coming in at $127.1 billion compared to the expected $127.63 billion. Adjusted earnings per share came in at 28 cents, compared with the 22 cents which was expected. Amazon Web Services had net sales of $20.5 billion, vs a $21 billion estimate.
Fourth quarter guidance had been expected to come in at $155 billion, however it fell short at between $140 billion and $144 billion. The company has been weighed down by the dollar’s strength internationally, as well as inflation, rising interest rates, and recession fears. Analysts noted the company indicated the coming holiday season will be likely be less active than previous years due to economic conditions, affecting fourth quarter guidance.
Amazon CEO Andy Jassy said in a statement, “There is obviously a lot going on in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our strategic, long-term bets.”
Amazon has endured losses over the previous two quarters, however it still turned a profit. Third quarter operating income had come in at $2.5 billion, down from $4.9 billion one year prior. Although its third quarter international operating loss was $2.5 billion, Amazon Web Services made up the discrepancy, as it produced a third quarter operating income of $5.4 billion.
Prime events over the last few months didn’t raise revenues as much as investors were hoping, despite July’s Prime Day being the biggest ever in terms of purchase numbers, with members worldwide buying more than 300 million products.
The miss by AWS was disappointing to investors as it has historically been a reliable performer. Raymond James analyst Aaron Kessler said he expected “continued leadership and momentum in cloud [and] AWS.”
The miss was part of a bigger wave of economic headwinds battering Big Tech, from fears of a global recession, to continued interest rate hikes by the central banks.
Wedbush analyst Dan Ives had written earlier in the month, “White knuckle fears around 3Q earnings season and negative revisions have sent tech stocks into a tailspin lower. Any positive news is negative news… in this market, and bad news is perceived as Armageddon and thus takes down tech stocks in a heartbeat.”
Amazon’s most recent Prime event may be the best example of how bad it is going. Bank of America analysts estimated that October’s Prime Early Access Sale brought in $5.7 billion, compared with last year’s $7.5 billion. Not even Amazon is immune to the consumer slowdown the world is undergoing.
