Amazon's (AMZN) stock fell more than 11% in early trading on Friday after its third-quarter forecast missed expectations on both sales and operating income. The company projected sales between $154 billion and $158.5 billion, below the analyst forecast of $158.43 billion. Operating income is expected to be between $11.5 billion and $15 billion, falling short of the $15.2 billion expected by Wall Street.
Despite reporting an EPS of $1.26, surpassing estimates of $1.04, and nearly doubling profits from the previous year, investors were concerned about the revenue shortfall. Amazon's revenue of $148 billion missed the expected $148.8 billion. The advertising segment, a growth area for Amazon, reported $12.8 billion in revenue, below the $13 billion expected. However, Amazon Web Services (AWS) exceeded expectations with $26.3 billion in revenue, surpassing the anticipated $26 billion.
Amazon's significant investment in AI and cloud infrastructure was noted, with over $30 billion spent on capital expenditures in the first half of the year, and more planned for the second half. This investment is driven by growing demand for AWS services, including generative AI tools.
Facing increasing competition from companies like Temu and Shein, Amazon plans to launch a discount digital storefront. Amazon's cautious consumer spending trends were highlighted by CFO Brian Olsavsky, who noted that consumers are increasingly seeking deals.
Broader tech industry performance was mixed, with Microsoft (MSFT) and Alphabet (GOOG, GOOGL) disappointing investors due to weaker cloud and ad revenue, respectively. In contrast, Meta (META) and Apple (AAPL) exceeded expectations, with Meta's strong performance particularly noted despite warnings of significant future capital expenditures. Apple reported strong results despite a decline in year-over-year iPhone sales.
Amazon's forecast and performance highlight market sensitivities to financial projections and the growing scrutiny of AI and infrastructure investments.
Despite reporting an EPS of $1.26, surpassing estimates of $1.04, and nearly doubling profits from the previous year, investors were concerned about the revenue shortfall. Amazon's revenue of $148 billion missed the expected $148.8 billion. The advertising segment, a growth area for Amazon, reported $12.8 billion in revenue, below the $13 billion expected. However, Amazon Web Services (AWS) exceeded expectations with $26.3 billion in revenue, surpassing the anticipated $26 billion.
Amazon's significant investment in AI and cloud infrastructure was noted, with over $30 billion spent on capital expenditures in the first half of the year, and more planned for the second half. This investment is driven by growing demand for AWS services, including generative AI tools.
Facing increasing competition from companies like Temu and Shein, Amazon plans to launch a discount digital storefront. Amazon's cautious consumer spending trends were highlighted by CFO Brian Olsavsky, who noted that consumers are increasingly seeking deals.
Broader tech industry performance was mixed, with Microsoft (MSFT) and Alphabet (GOOG, GOOGL) disappointing investors due to weaker cloud and ad revenue, respectively. In contrast, Meta (META) and Apple (AAPL) exceeded expectations, with Meta's strong performance particularly noted despite warnings of significant future capital expenditures. Apple reported strong results despite a decline in year-over-year iPhone sales.
Amazon's forecast and performance highlight market sensitivities to financial projections and the growing scrutiny of AI and infrastructure investments.