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.
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.
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.
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.
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.