Despite record profits, Amazon shares sink on disappointing sales

Despite record profits, Amazon shares sink on disappointing sales

While both on Thursday reported bumper profits in the past quarter, revenues came up short of expectations at Google and Amazon spooked the markets with a so-so forecast for the all-important holiday season coming up.

For stock investors, "some of the pessimism is anchored in dimming growth forecasts and rising interest rates", said Eric Lascelles, chief economist at RBC Global Asset Management.

Investors focused on the negative.

Shares are up in early trade, at around 3.6%.

It will cost Amazon an extra $333 million to fund its higher salaries during the fourth quarter, according to Cowen, a financial research company.

Yet again, Amazon's cloud business gave it a big boost.

Shares were set to open down nearly 9% on Friday. Google's other revenue, which includes its cloud business, grew 29 percent on year, 4 percent below estimates of Cowen & Co. analysts. In the third quarter previous year, Amazon pulled in $US43.7 billion in sales.

Boston Red Sox at Los Angeles Dodgers
Despite his contributions to the Red Sox 2004 championship, the Boston-based former pitcher was not in attendance prior to Game 2. If the Red Sox ending up having to play more games at Fenway Park, tickets rise even higher according to Ticket Network.

This healthy figure represents a 122% increase year over year and a jump of $301m from the last quarter, putting Amazon on track to hit the psychologically important $10bn a year mark in annualised sales for the sector. The division's operating profit, meanwhile, grew 77% over the same time period to $2.1 billion, accounting for more than a third of Amazon's total net profit for the period.

But the company also saw a windfall from its retail operations, particularly those in North America. The company forecast an operating income range between $1.4 billion and $2.4 billion, compared with $347 million a year earlier. That purchase happened in the middle of the third quarter last year, which meant that Amazon included only about a month's worth of Whole Foods' revenue in its third-quarter results last year, versus a whole quarter's worth this time around.

Amazon also introduced the all-new Fire HD 8 tablet, featuring an 8-inch HD display, a quad-core processor, 16 GB of internal storage with support for up to 400 GB more via microSD, up to 10 hours of mixed use battery life, and hands-free access to Alexa. Add in the recent stock market rout, and the tech companies had little room to bobble their results.

The company now groups its advertising group under "other" on its balance sheet.

Amazon (AMZN): Shares down here, around 7.1%.

"Overall, Amazon's growth trajectory remains solid, including advertising, grocery, pharmacy, and specialty retail, as well as Amazon Business ($10 billion in sales in eight countries) and Amazon Web Services", Telsey Advisory Group analysts said.

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