Following the release of poor fourth-quarter forecasts and revenue and sales disappointments for its cloud division, Amazon (AMZN) shares plunged by over 20% in after-hours trading on Thursday.
Following the bell, the e-commerce juggernaut released the following:
- Actual revenue was $127.1 billion compared to the predicted $127.63 billion.
- Actual adjusted earnings per share (EPS): 28 cents as opposed to the predicted 22 cents.
- Actual net sales for Amazon Web Services (AWS) were $20.5 billion vs the forecast $21 billion.
Instead of the anticipated $155 billion for the fourth quarter, Amazon forecasted between $140 billion and $144 billion. The corporation has suffered from the high dollar, much like other businesses that conduct business abroad. Inflation, rising interest rates, and worries about a recession are some challenges Amazon must contend with.
The company anticipates a tempered holiday season, which falls under Q4 specifically. According to Amazon CEO Andy Jassy;
“there is certainly a lot going on in the macroeconomic climate, and we’ll balance our investments to be more streamlined without jeopardizing our strategic, long-term bets.”
Despite posting losses in the previous two quarters, Amazon nevertheless made money. Compared to $4.9 billion in the same quarter last year, Amazon’s operational income for the third quarter was $2.5 billion. AWS made up the difference, claiming a Q3 operating income of $5.4 billion, despite the company’s $2.5 billion Q3 worldwide operating loss.
The recent Prime Day sales didn’t increase Amazon’s revenue as much as investors might have anticipated. The company’s largest Prime Day ever in terms of sales occurred in July and was reported in the earnings release. More than 300 million items were purchased by Prime members globally during this period. The business withheld the event’s revenue statistics.
The AWS shortfall is also a noteworthy letdown because it has been a corporate pillar and there was a lot of optimism from analysts heading into Thursday. In a report dated October 25, Raymond James analyst Aaron Kessler predicted “continued leadership and momentum in cloud [and] AWS.”
The degree to which this environment, including a hawkish Fed and the threat of a recession, has alarmed Big Tech cannot be overstated.
Wedbush analyst Dan Ives stated earlier this month that “negative revisions and white-knuckle anxiety around the 3Q earnings season have driven tech stocks into a spiral lower.” In this market, “any favorable news is negative news, and bad news is regarded as Armageddon, taking down tech stocks in an instant.”