Amazon (AMZN) Stock Price Down Almost 9% In The Wake Of Earnings Predictions

Summary:

• Amazon released revenue predictions far below those of Wall Street.
• Rising inflation and energy costs have caused people and businesses to reevaluate their purchasing power.

AMZN missed forecasted expectations

Amazon released revenue predictions far below those of Wall Street, warning that consumer spending was in "uncharted waters," sending its shares down 10% on Friday and adding to the air of doom prevailing in the internet industry. The e-commerce and cloud computing company, which has emerged as a contemporary economic barometer for the US, predicted that fourth-quarter revenues, which include the crucial holiday shopping season, would range between $140 billion and $148 billion. According to S&P Capital IQ, that was as much as $15 billion less than the $155 billion analysts had predicted.

Analysts had predicted $5 billion in operational profitability for the fourth quarter, but Amazon said it would be between $0 and $4 billion.

Rising inflation and energy costs, according to Amazon's chief financial officer Brian Olsavsky, have caused people and businesses to reevaluate their purchasing power. For many consumers' budgets, this is unknown territory, he added.

After Alphabet, the owner of Google, Meta, the parent company of Facebook, and Microsoft alarmed Wall Street with warnings of slower growth and more costs, it was the latest Big Tech company to let investors down this week.

Amazon announced third-quarter revenues of $127.1 billion, up 15% from the prior year but slightly below analysts' forecasts. With a $1.1 billion increase in non-operating revenue from its share in electric vehicle manufacturer Rivian, net income decreased to $2.9 billion from $3.2 billion a year earlier.

The third quarter saw lower than anticipated sales growth and poorer margins for Amazon's cloud business, which for much of the year had helped to counteract deterioration in retail. For the first time since the year 2020's conclusion, cloud revenue increased by less than 30%, rising by 28% to $20.54 billion.

Jassy's first full year in leadership would come to an end if the fourth quarter was poor. When Amazon's problems began to worsen in July 2021, he succeeded company founder Jeff Bezos.

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Sources: finance.yahoo.com, ft.com