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Amazon Stock Dives As Weak Holiday Sales Outlook, Slowing Web Services Cloud Q3 Earnings Beat

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“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,” said CEO Andy Jassy.

Updated at 4:21 am EST

Amazon Inc  (AMZN)  posted better-than-expected third quarter earnings Thursday, but forecast disappointing holiday sales despite adding an extra Prime shopping day event, sending shares sharply lower in after-hours trading.

Amazon said its second quarter loss was pegged at $2.9 billion, or 28 cents per share, down from a split-adjusted profit of 31 cents per share over the same period last year but firmly ahead of the Street consensus forecast of 22 cents per share. 

Revenues rose 14.7% from last year to $127.1 billion, just shy of analysts’ estimates of a $127.45 billion tally. Amazon Web Services contributed $20.54 billion, rising 27.5% from last year but missing Street forecasts by around $1 billion. 

Ad sales were also higher, rising 25% to $9.55 billion, while online store sales rose 7% to $78.84 billion.

Looking into the current quarter, Amazon said it sees operating income of between zero and $4 billion, compared to a Street forecast of $5 billion, on revenues in the range of $140 billion to $148 billion, compared to the Refinitiv forecast of around $155 billion.

“In the past four months, employees across our consumer businesses have worked relentlessly to put together compelling Prime Member Deal Events with our eighth annual Prime Day and the brand new Prime Early Access Sale in early October, said CEO Andy Jassy. “The customer response to both events was quite positive, and it’s clear that particularly during these uncertain economic times, customers appreciate Amazon’s continued focus on value and convenience.” 

“We’re also 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,” he added. “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 shares were marked 19% lower in after-hours trading immediately following the earnings release to indicate a Friday opening bell price of $89.99 each.

Late last month, Amazon unveiled pay increases for warehouse and transportation workers just days after it added another ‘mini Prime day’ event in October to capture demand from value-focused consumers and focus on members of its Prime program.

Amazon said employees would earn between $16 and $26 per hour, with average starting salaries rising by $1, to $19 per hour, as it gears-up for the peak of the holiday retail season.

Amazon, one of the biggest private employers in the United States, said the pay increases would cost around $1 billion over the next year.

Amazon.com Third-Quarter Earnings Live Blog

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