Amazon attributes its weak revenue forecast in part to an exceptionally busy news cycle.
During a call with reporters after the company’s second-quarter earnings report on Thursday, Amazon CFO Brian Olsavsky mentioned that the anticipated decline in online shopping this quarter is partly due to consumer distractions. He cited events such as the ongoing Paris Olympics, the upcoming U.S. presidential election, and the attempted assassination of former President Donald Trump at a rally in Pennsylvania.
“Customers only have so much attention,” Olsavsky said. “When high-profile events occur, people shift their focus to the news. It’s more about distractions.”
For the third quarter, Amazon expects revenue between $154 billion and $158.5 billion, with the midpoint of $156.25 billion falling below the consensus estimate of $158.24 billion by LSEG. This disappointing guidance, along with a revenue miss for the second quarter, caused Amazon shares to drop more than 7% in extended trading.
The chaotic news cycle is not the sole factor affecting consumer spending, a topic not discussed with analysts on the call. Executives addressed the issue of cautious consumer spending due to economic challenges, with CEO Andy Jassy noting that shoppers are opting for cheaper items, resulting in a lower average selling price (ASP) on products sold.
“Customers continue to trade down on price when they can,” Jassy said. “While higher-ticket items like computers and electronics are growing faster for us compared to the industry, they’re still slower than in a more robust economy.”
Olsavsky added that consumers remain cautious and are focusing more on purchasing everyday essentials, contributing to Amazon’s slight revenue shortfall for the quarter.
Other e-commerce companies have observed similar trends. Wayfair noted a slowdown in home goods purchases due to inflation and a stagnant housing market. Etsy CEO Josh Silverman remarked on CNBC’s “Squawk Box” that “it’s a tough time for the consumer,” with every industry feeling the impact.
Meanwhile, NBCUniversal, the parent company of CNBC, reported at least $1.25 billion in ad revenue from broadcasting the Paris Olympics. “More than 70% of advertisers for the 2024 Summer Games are new, with nearly half a billion dollars coming from first-time sponsors,” the company said.
Olsavsky acknowledged that while this situation is a short-term setback for Amazon, it adds to the difficulty in forecasting.
“Often, purchases are deferred, and people eventually return to buy what they intended,” he said.
