Amazon stock sinks 20% after quarterly income drops

E-commerce company's net income decreased to $2.9bn in the third quarter ending on September 30

Amazon's third-quarter revenue increased 15 per cent on an annual basis to $127.1 billion. AP

Amazon stock nosedived almost 20 per cent on Thursday after the e-commerce company posted a more than 9.3 per cent drop in third-quarter net income and issued disappointing fourth-quarter revenue guidance.

The company’s net income decreased to $2.9 billion in the third quarter ending on September 30, compared with $3.2bn in the third quarter of 2021. However, it improved from the net loss of $2bn that the company incurred in the second quarter of this year.

The July-September period’s net income included a pre-tax valuation gain of $1.1bn included in non-operating income from the common stock investment in Rivian Automotive, the company said.

Amazon chief executive Andy Jassy. AP

The Seattle-based company’s revenue during the third quarter increased 15 per cent on an annual basis to $127.1bn, missing analysts' average estimate of $127.46bn, Refinitiv reported.

It was up almost 5 per cent on a quarterly basis.

There is obviously a lot happening in the macroeconomic environment and we will balance our investments to be more streamlined without compromising our key long-term, strategic bets

Andy Jassy,
Amazon chief executive

This was the eighth consecutive quarter with more than $100bn in sales.

The share price of the company fell more than 4 per cent to $110.96 at the close of trading on Thursday but plummeted nearly 20 per cent in after-hours trading. The company's stock price has declined almost 35 per cent since the start of the year.

North America market sales, which increased nearly 20 per cent year-over-year to $78.8bn in the September quarter, contributed almost 62 per cent to the overall sales of the company.

However, the international markets sales dropped 5 per cent annually to $27.7bn. It added 22 per cent to the overall sales.

Amazon Web Services, the company’s subsidiary that provides on-demand cloud computing platforms to other businesses, had good momentum in sales.

Its revenue reached $20.5bn in the third quarter, rising annually by more than 28 per cent.

“We are … encouraged by the steady progress we are making on lowering costs in our stores fulfilment network, and have a set of initiatives that we are methodically working through that we believe will yield a stronger cost structure,” Amazon chief executive Andy Jassy said.

“There is obviously a lot happening in the macroeconomic environment and we will balance our investments to be more streamlined without compromising our key long-term, strategic bets.

“What won’t change is our maniacal focus on the customer experience and we feel confident that we’re ready to deliver a great experience for customers this holiday shopping season.”

Amazon said its third-quarter operating income decreased to $2.5bn, compared with $4.9bn in the same period last year.

E-commerce companies including Amazon have trialled drone package deliveries. Photo: Amazon

In its fourth-quarter sales guidance, Amazon expects revenue to hover between $140bn and $148bn, jumping 2 per cent to 8 per cent compared with the same period a year earlier. However, industry analysts were expecting sales of about $155.2bn, according to Refinitiv.

“This guidance anticipates an unfavourable impact of approximately 460 basis points from foreign exchange rates,” Amazon said.

Operating income is expected to be between $0 to $4bn in the three months to December 31, the company said.

Amazon also announced it would invest nearly $1bn in pay increases for its fulfilment network employees over the next year in the US, bringing average pay to more than $19 per hour.

It also plans to hire 150,000 people for seasonal, full-time and part-time roles across its operations network in the US to help deliver to customers during the holiday season.

AWS has joined forces with Abu Dhabi Investment Office to launch a new cloud innovation centre in the UAE’s capital. Reuters

Earlier this month, AWS joined forces with Abu Dhabi Investment Office to launch a new cloud innovation centre in the UAE’s capital that will help spur innovation in the public and private sectors.

The company is also investing more than $972 million to electrify its European transport network as it hastens its push to achieve net-zero emissions within the next two decades.