Amazon Sinks After Earnings, Q4 Guidance Fall Short

Investing.com – Amazon.com’s (NASDAQ:) third-quarter revenue beat estimates, but its earnings and fourth-quarter outlook fell short of expectations, sending the stock sharply lower in extended trading.

Net sales for the fourth quarter are expected to be between $80 billion and $86.5 billion, or to grow between 11% and 20% compared with fourth-quarter 2018, the company said. That was below estimates of $87.17 billion. Net operating income is expected to be between $1.2 billion and $2.9 billion, compared with $3.8 billion in fourth quarter 2018.

The downtick in guidance stoked worries about this year’s holiday shopping season, a crucial sales period for the company, which runs from the U.S. Thanksgiving holiday in late November through New Year’s.

The company reported earnings per share (EPS) of $4.23 on revenue of $69.98 billion. Analysts polled by Investing.com anticipated EPS of $4.59 on revenue of $68.82 billion. That compared to EPS of $5.75 on revenue of $56.58 billion in the same period a year earlier. The company had reported earnings per share of $5.22 on revenue of $63.4 billion in the previous quarter.

The earnings miss comes as operating margins fell 600 basis points 25.1% in the third quarter, hurt by the company’s ramp-up in spending to roll out free-one day delivery.

The company said it expected to invest $1.6 billion in one-day shipping in the fourth quarter.

Revenue from its higher-margin businesses like cloud and advertising Amazon Web, however, helped steady performance.

Amazon (NASDAQ:) Web Services, the fast-growing cloud services business, surged 35% to $9 billion, roughly in-line estimates from FactSet of $9.1 billion.

Amazon (NASDAQ:) share fell 8% after hours.

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