Amazon presented a complex view of its financial health on Thursday following the release of its quarterly earnings report. While the e-commerce giant highlighted significant expansion in its cloud division, it issued a conservative sales outlook for the fourth quarter, which includes the critical holiday shopping period. This cautious forecast comes after the company's fiscal third-quarter results fell short of Wall Street analysts' expectations.
The Seattle-based corporation reported strong performance from its AWS cloud computing unit, with sales rising 39.3% during the quarter ended September 30. This growth rate surpassed the 37% increase seen in the previous quarter and marked the fastest expansion for the division in nearly five years. Despite this positive indicator, Amazon's shares dropped more than 6% in after-market trading as investors remained focused on the performance of its core business.
Financially, Amazon recorded a net income of $20.69 billion, or $1.89 per share, for the three-month period. This represents a slight decline from the $21.19 billion, or $1.95 per share, reported in the same period last year. Total sales increased to $201.94 billion compared to $180.17 billion a year ago. However, these figures missed analyst projections, which anticipated earnings of $1.97 per share on sales of $202.2 billion according to FactSet.
Looking ahead, Amazon projected net sales for the fourth quarter to range between $240 billion and $247 billion. This forecast implies a 12% to 16% increase compared to the prior year, though it sits slightly below the analyst expectation of $244.16 billion. To prepare for the upcoming demand, the company announced earlier this month that it would hire 300,000 seasonal workers in the US, an increase from the 250,000 hired last year.
Investor attention is also heavily focused on whether Amazon's substantial investments in artificial intelligence are beginning to yield returns. CEO Andy Jassy disclosed in July that capital spending for the fiscal year, primarily directed toward AI, robots, semiconductors, and satellites, is expected to reach $220 billion. This figure represents an increase from the $200 billion plan announced in February and is significantly higher than the $128 billion spent last year. Jassy attributed the rise partly to the increased cost of memory chips and noted that even at this level, capacity may not meet all customer demands.
The market reaction occurred against a backdrop of broader concerns within the AI industry following Alphabet's recent earnings report. The parent company of Google and YouTube reported weaker summer growth than expected and reduced free cash flow after spending over $51 billion on property and equipment. Consequently, Alphabet's stock value fell by half a trillion dollars, reflecting wider anxieties regarding the heavy capital expenditure required to build data centers and acquire AI chips.
Sources: The Guardian Technology.