Amazon profits drop sharply amid big spending to speed package delivery
Amazon’s profits slid 26% in the last quarter as the company poured money into free shipping and its cloud storage business.
While the company’s revenues rose sharply, up 24% to $70bn for the quarter or more than $23bn a month, its profits fell to $2.1bn down from $2.9bn from a year earlier.
The financial miss comes as Amazon is facing greater scrutiny from Washington, with politicians from both sides calling for investigations of its business practices.
The company forecast that next quarter – which includes the holiday shopping season – sales would increase to between $80bn and $86.5bn, 11% or 20% higher than the fourth quarter of 2018.
Shares dropped close to 7% in afterhours trading.
Amazon spent $800m in the second quarter to expand its free one-day delivery programme as it faces sharper competition from Walmart. World-wide shipping costs increased 46% to $9.6bn from the previous year.
The company is also investing heavily in its Amazon Web Services (AWS) cloud storage as Microsoft and others challenge its business. AWS reported $9bn in sales, slightly below analysts’ expectations of $9.1bn.
The latest quarterly results included Prime Day, its shopping event for Amazon Prime members who pay a yearly fee for free shipping and access to its streaming media services. This year’s Prime event was the largest in the company’s history with sales surpassing Black Friday and Cyber Monday sales combined. During the July sale the company sold over 100,000 laptops and more than a million toys.
“We are ramping up to make our 25th holiday season the best ever for
Prime customers – with millions of products available for free one-day delivery,” said Jeff Bezos, Amazon’s founder and chief executive.