On Thursday, Amazon reported weaker-than-expected revenue for the second quarter and issued a disappointing forecast for the current period, causing its shares to drop as much as 6% in extended trading.
Here’s a breakdown of the company’s performance:
– **Earnings:** $1.26 per share, compared to the $1.03 per share expected by LSEG
– **Revenue:** $147.98 billion, falling short of the $148.56 billion projected by LSEG
Key figures from Wall Street include:
– **Amazon Web Services (AWS):** $26.3 billion, exceeding the $26 billion forecast by StreetAccount
– **Advertising:** $12.8 billion, slightly below the $13 billion estimate by StreetAccount
Amazon forecasts third-quarter revenue to be between $154 billion and $158.5 billion, indicating year-over-year growth of 8% to 11%. However, the midpoint of this range, $156.25 billion, is below the average analyst estimate of $158.24 billion from LSEG.
The company is facing sluggish growth in its core retail business amid increasing competition from discount sites like Temu and Shein, which offer low-cost items from Chinese merchants to U.S. consumers. Sales in its online stores segment grew only 5% year over year, while revenue from third-party seller services, including commissions and fulfillment fees, rose 12% during the quarter.
“We came in slightly short on revenue growth in North America compared to our internal estimates,” said CFO Brian Olsavsky during a call with reporters.
Olsavsky attributed the revenue miss to consumers opting for cheaper products, resulting in a lower average selling price (ASP). “We’re seeing lower ASP in the products selected by customers,” he noted. “Consumers are being cautious with their spending and opting for lower-priced items.”
In June, Amazon announced plans to launch a discount store featuring mostly unbranded items priced under $20, according to a CNBC presentation. This store will offer apparel, home goods, and other products.
For the third quarter, Amazon expects operating income to be between $11.5 billion and $15 billion, compared to $11.2 billion in the same period last year. Analysts had forecast $15.3 billion in operating income.
AWS grew 19% year-over-year, surpassing estimates but expanding at a slower rate than competitors Microsoft and Google, which reported cloud growth of 29%.
Amazon’s advertising revenue increased 20% to $12.77 billion for the quarter, falling slightly short of estimates. Despite this, the advertising unit remains a major profit driver, with most revenue coming from sponsored product listings on Amazon’s online store. The company continues to expand its digital ad offerings and market share, competing with Meta and Alphabet.
Among online ad companies, Meta reported a 22% revenue growth, while Google’s ad business grew 11%. Snap reported a 16% increase in revenue.
Amazon’s net income doubled from the previous year to $13.5 billion, or $1.26 per share, up from $6.75 billion, or 65 cents per share, reflecting significant cost-cutting measures across the company.
Olsavsky attributed part of the forecast weakness to consumer distractions from global events, such as the ongoing Paris Olympics and the attempted assassination of Donald Trump in July. “Customers only have so much attention,” he said. “Events like the Olympics and high-profile news can shift consumer focus and impact traffic patterns.”