Amazon shares dip lower as earnings take a hit from higher shipping costs and slow cloud growth

1344 Inc (NASDAQ: AMZN) announced its second quarter results after the closing bell Thursday. The e-commerce giant beat revenue expectations, but earnings fell short.

Revenue in Amazon Web Services (the company’s cloud computing segment) grew by 37% in the quarter on an annual basis, missing analysts’ consensus of 38%.

Earlier this year, the company pledged to spend $800 million during the quarter in order to make one-day shipping the new standard for Amazon Prime customers. That move saw its shipping costs grow 36% year-over-year.

Amazon shares fell 2.7% in after-hours trade to $1,921 per share, following the earnings report. The stock had rallied 32% since the beginning of the year before the report, and finished the regular session with a loss of $26.99, or 1.35%.

AMZN Earnings & Outlook

Amazon had net income of $2.6 billion, or $5.22 per diluted share, in the three months ended June 30, 2019, compared with the same period last year when the company reported net income of $2.5 billion, or $5.07 per diluted share. Analysts surveyed by Refinitiv had been looking for adjusted earnings of $5.57 per share in Q2 2019.

Operating income rose $3.1 billion in the second quarter, from $3.0 billion in earlier-year period. Net sales came in at $63.4 billion in Q2 2019, a 20% increase from $52.9 billion in the prior-year quarter. On average, analysts were expecting net sales of $62.5 billion, according to data compiled by Refinitiv.

Amazon forecasts sales of between $66 billion to $70 billion for the current quarter, up between 17% to 24% on a year-over-year basis. Executives also expect operating income to drop as much as $1.6 billion in quarter, as the company continues to spend on new initiatives.

Amazon CEO Comments

“Customers are responding to Prime’s move to one-day delivery — we’ve received a lot of positive feedback and seen accelerating sales growth,” said Jeff Bezos, Amazon founder and CEO. “Free one-day delivery is now available to Prime members on more than ten million items, and we’re just getting started. A big thank you to the team for continuing to make life easier for customers.” Inc Profile

Amazon is among the world’s highest-grossing online retailers, with $233 billion in net sales and $408 billion in estimated global gross merchandise volume (GMV) in 2018.

Online product and digital media content sales accounted for 53% of net revenue in 2018, followed by commissions, related fulfillment and shipping fees, and other third-party seller services (18%), Amazon Web Services’ cloud compute, storage, database, and other offerings (11%), Prime membership fees and other subscription-based services (6%), product sales at Whole Foods and other physical store retail formats (7%), and advertising services and cobranded credit cards (4%).

International segments constituted 32% of Amazon’s non-AWS sales in 2018, led by Germany, the United Kingdom, and Japan. – Warrior Trading News