Amazon founder and CEO Jeff Bezos addresses the audience during the Amazon Amazon Re: MARS Robotics and Artificial Intelligence Conference at the Aria Hotel in Las Vegas, Nevada on June 6, 2019.
Mark Ralston | AFP | Getty Images
Amazon's third-quarter earnings on Thursday fell from street expectations, leading to a 9% drop in after-hours trading.
Here's what the company reported against analyst expectations:
- EPS: $ 4.23 against $ 4.62, according to analysts polled by Refinitive
- Revenue: $ 70 billion against 68, $ 8 billion, according to analysts polled by Refsitive
- AWS: $ 9 billion versus $ 9.1
Revenue increased 24% to $ 70 billion in the quarter, showing that big investments throughout the company are paying off. Amazon spent more than $ 800 million in the second quarter to expand its free one-day delivery program to more products and regions, and is expected to continue investing in the program for the foreseeable future. He also cited increased costs for the growing cloud business and increased ad sales.
But Amazon gave fourth-quarter revenue guidance in the $ 80.0 billion and $ 86.5 billion range, well below the $ 87.4 billion street average, which indicates a
heavy investment return the cycle is a fraction of Amazon's profitability. Its operating income dropped to $ 3.2 billion, down 15% from $ 3.7 billion. For the fourth quarter, Amazon estimates operating revenues will fall between $ 1.2 billion and $ 2.9 billion, also below the $ 4.2 billion street estimate.
Meanwhile, Amazon's cloud business had $ 9 billion in quarterly sales, falling slightly below analysts' expectations of $ 9.1. billion. AWS's operating income was $ 2.26 billion, up 9% from the previous period, but below the FactSet consensus estimate of $ 2.55 billion. For the past four years, AWS has provided the bulk of Amazon's operating revenue.
In a prepared statement, Amazon CEO Jeff Bezos highlighted the company's free one-day delivery initiative, saying it led to greater customer satisfaction.
"Customers love the transition from Prime to two days to one day – this year they have already ordered billions of items with free one-day shipping. It's a big investment and it's the right long-term solution for customers," Bezos said.
Amazon's shares have grown 18% this year, just below the 20% gain for the S & P500.
Third quarter results include Prime Day sales, which the company called the largest shopping event in history. Amazon previously said Prime Day sales surpass those of Black Friday and Cyber Monday, with more than 48 million items sold for the 48-hour event.
Investors will seek further comment on the regulatory environment, as politicians from both sides of the aisle recently called for tighter controls on the company's business practices.
WATCH: Here's what analysts expect from Amazon's earnings