Despite inflationary headwinds Amazon pulled in a double-digit increase in third-quarter sales, which were up 15% to $127.1 billion, but still came in shy of Wall Street revenue expectations.
The company expects growth to slow down considerably in Q4, projecting net sales for the year-end quarter to be between $140 billion and $148 billion, or to grow between 2% and 8% compared with Q4 2021.
For Q3, Amazon reported net income of $2.87 billion (down 9%), or earnings per share of 28 cents, after sustaining losses in the first half of 2022 due to its investment in e-vehicle company Rivian. Wall Street analysts on average expected Amazon to post Q3 sales of $127.45 billion and earnings per share of 21 cents.
Amazon shares tumbled as much as 20% in after-hours trading on the Q3 revenue miss and weak Q4 outlook. The company’s earnings report comes after tech giants Meta and Alphabet both missed Q3 targets on weak ad spending.
In reporting Q3 results, the ecommerce giant called out viewing of Prime Video’s “The Lord of the Rings: The Rings of Power” and its exclusive streaming of the NFL’s “Thursday Night Football” games. The eight-episode “Rings of Power” premiered Sept. 2; it’s the most expensive TV show ever made with an estimated $450 million budget (not including $250 million it paid in a licensing deal with J.R.R. Tolkien’s estate).
“The Lord of the Rings: The Rings of Power” drew more than 25 million global viewers on its first day, the biggest debut in Prime Video history, and is nearing 100 million viewers to date, according to Amazon.
“There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets,” Amazon CEO Andy Jassy said in announcing the results. He said the company was “encouraged by the steady progress we’re making on lowering costs in our stores fulfillment network, and have a set of initiatives that we’re methodically working through that we believe will yield a stronger cost structure for the business moving forward.”
Amazon has been taking steps to rein in costs. That said, the company earlier this month said it intends to hire 150,000 employees throughout the U.S. in full-time, part-time and seasonal roles across its operations network to handle the expected 2022 holiday-shopping surge.
In a relative bright spot for Amazon in Q3, advertising services revenue hit $9.55 billion, up 25% year over year, growing faster in the period than in the first half of 2022. The AWS cloud-services group posted revenue of $20.54 billion, up 27%, lower growth than in the first six months of the year. AWS segment operating income was $5.4 billion, compared with operating income of $4.9 billion in third quarter 2021.