Investors chop 7% off Amazon stock

Amazon on Thursday forecast revenue and profit for the holiday quarter below expectations, as it faces fierce competition and rising costs from its plan to speed up delivery times globally.

Shares fell nearly 7 percent in late trading, to $1,658.30, as revenue growth for the company’s lucrative cloud computing business also slowed down in the third quarter, missing analysts’ estimates. Amazon beat expectations on overall third-quarter revenue, posting sales up 24 percent, to $70 billion.

The news underscores the big investment Amazon is making to cut delivery times to one day for its Prime loyalty members, a way to outmaneuver rivals such as Walmart that have marketed two-day shipping without subscription fees.

Costs for that program will nearly double to $1.5 billion during the holiday season, from what Amazon spent on one-day delivery during the second quarter, the company’s chief financial officer, Brian Olsavsky, said on a call with reporters.

Expenses rose because the company has to move inventory closer to customers and beef up its lastmile transportation footprint, a big expense, to make the plan work, Olsavsky said. The company also is giving up the fees that customers used to pay for one-day delivery and is still learning what the longterm cost structure of one-day delivery will be, he said.

“By and away the biggest driver this time is the people that we’re adding for fulfillment and transportation roles,” he said.

Still, Amazon is betting that fast delivery will spark sales, a strategy that over years has helped it become the world’s largest online retailer.