Amazon reported its first earnings decline in a year

Amazon earnings

Amazon (NASDAQ: AMZN) made news on Thursday, but unfortunately, it wasn’t in a good way. Shares of the company fell in response to news that Amazon’s record-high earnings had come to an end after years of reporting record profits every quarter.

Just a week after its Prime Day sale, the company reported it’s second-quarter financial results which were somewhat disappointing to say the least.

Q2 earnings were at $2.6 billion, or $5.22 per share, which is still up from $5.07 per share a year ago but fell below Wall Street analyst expectations. Revenue was around $63.4 billion, which again was up from the $52.9 billion seen last year.

Their Amazon Web Services cloud-computing business, which is the most profitable portion of Amazon, saw a 37 percent increase and represented $8.4 billion of the total revenue figure for the quarter.

The company previously had seen a record profit of over $10 billion back in 2018, which was over three times its previous high. It’s uncertain whether this year will breach that figure this year. Amazon had already done some work beforehand to prepare analysts and investors that a decline would be coming, expecting a milder forecast for their Q2 profits.

CFO Brian Osavsky broke down exactly where Amazon has increased its spending in a conference call later on Thursday. Regardless, the company’s Q2 profits fell short more than $600 million from what analysts were expecting.

Osavsky went on to mention a number of things in the conference call, but most notable was the fact that the company spent $800 million more than expected ensuring that it guaranteed one-day deliveries for Prime subscribers’ deliveries, which was the main reason for the shortfall.

Other operating expense increases come from a new wave of hiring after a pause in 2018. For the third quarter, Amazon predicts revenues of around $66 billion to $70 billion, which would be around $3.7 billion less in comparison to the same time last year.

”It does create a shock to the system, we’re working through that now, and we expect we will be working to that for a number of quarters,” said the CFO. “But when the dust settles, we will regain our cost efficiency over time.”

Shares of Amazon fell by $27 today, falling below the $2,000 price point on Thursday. Declining by 1.35 percent during the course of the day and an additional 1.7 percent in after-hours trading, Thursday ended up being one of the worst single-day losses for the company seen in months.