Prime delivery race creates hurdles for Amazon
Retail giant Amazon disappointed investors and analysts alike tonight, reporting profit for its second quarter well below estimates and breaking its long-running record earnings streak.
Profit came in at $2.6bn (£2.1bn), or $5.22 per share, for the three months to the end of June. Analysts were expecting income of $5.57 per share.
Amazon also said earnings for the upcoming quarter would be between $2.1bn and $3.1bn, compared to $3.7bn a year ago. Shares fell more than two per cent in after-hours trading.
The slip was attributed to Amazon’s focus on its cash-intensive one-day Prime delivery service, as operating costs jumped 21 per cent to $60.3bn.
Its money-making cloud computing division Amazon Web Services also missed estimates of $8.5bn, rising 37 per cent to reach $8.4bn.
The results come amid a strong period of competition for Amazon, as rivals ramp up spending in online delivery to challenge its stranglehold on the market.
The firm is currently under scrutiny for anti-competitive practices by EU authorities, and is also said to be facing an antitrust probe by the US Federal Trade Commission.
“Last quarter the company noted it would spend $800m to offer its one day shipping for Prime members nationwide and it lost a key partner in next day air service when Fedex announced it would cease doing business with the e-commerce giant,” said Jon Reily, Amazon’s former head of e-commerce and now vice president and global commerce strategy lead at Publicis Sapient.
“All of those things could spell trouble for Amazon, but it’s also one of the few companies that could weather that storm without a hitch.”
Main image credit: Getty