The acceleration of all things eCommerce has led to record earnings and lofty expectations. That’s why it’s not shocking that Amazon saw shares drop after the company reported lighter-than-expected third-quarter results and poor guidance for the upcoming holiday period.
Their third quarter looking sluggish is simply a result of the retail giant being unable to keep up with pandemic-driven sales levels. Revenue rose in the third quarter for Amazon–up 15 percent. The problem though, is it was down from 37 percent growth compared to the same period a year ago, yet another unavoidable casualty of COVID-influenced sales numbers.
These numbers are reflective of the slowing sales growth Amazon is experiencing, mainly due to a couple factors:
- Consumers heading back into physical retail locations
- The ever-present, highly chaotic nature of the current supply chain predicament
These two factors will continue to weigh on sales, which segues nicely into the next big miss: their guidance.
For the fourth quarter, Amazon forecast sales between $130 billion and $140 billion. These numbers represent a modest 4-12 percent growth. Analysts, on the other hand, were expecting revenue projected closer to $142 billion, which represents a 13 percent YoY increase. Also, for the first time in its history, revenue from Amazon services surpassed revenue derived from its retail sales. Net product sales represented $54.9 billion while revenue from Amazon Web Services (AWS), Amazon Advertising (sponsored search and DSP), third-party seller services and their Amazon Prime subscriptions added up to $55.9 billion.
Amazon Web Services had a particularly strong quarter. Revenue via AWS jumped 39 percent to $16.1 billion while analysts anticipated closer to $15.5 billion. Without the profit derived from AWS, Amazon would have recorded a loss for the quarter.