Amazon’s operating profiting fell in the third quarter and missed analysts estimates.
Amazon record operating profit of just $4.9 billion, well behind analyst estimates of $5.5 billion and 21% decline on profits for the same period last year.
The lower than expected profits was a combination of revenue of $110.8 billion that missed estimates and a significant jump in marketing costs. Total operating costs 17.8% compared to last year.
Shares in the world’s largest online retailer fell by somme 4% in premarket trading.
Guiding on activity in the fourth quarter, Amazon said they expected revenue to be between $130 billion and $140 billion.
“While staying consistently in the black, Amazon has never been overly focussed on the bottom line. That willingness to invest in what the group hopes will be long term success at the expense of short term profits is on display again in these results,” said Nicholas Hyett, Equity Analyst at Hargreaves Lansdown.
“Marketing expenses have risen nearly 50% year-on-year, and a whole host of other costs are also outpacing revenue growth as the group ramps up its capacity to meet increased customer demand and expectations. However, even in a company with Amazon’s track record, a sudden, unexpected reverse in margins can make investors jumpy.”
“We’re happy to give newly installed CEO Andy Jassy the benefit of the doubt for now. The group has a sizeable cash pile on hand to fund investment and newer products are still showing very steady growth. The relatively new advertising proposition grew something like 50% year-on-year. We also take comfort from the fact AWS is already showing rapid and profitable growth following investment earlier in the pandemic.”
