What To Expect From Amazon Through The End Of The Year After Stock Plunge

by Trefis Team
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Amazon (NASDAQ:AMZN) announced its third quarter results on October 25, reporting a sustained high double digit (39%) year-over-year increase in net revenues to just under $56.6 billion. In addition to expected revenue growth across segments, the company outperformed expectations in terms of operating profit as well as earnings. Despite strong performance for the September quarter, Amazon’s stock fell 10% to $1,610 mainly due to the slight deceleration in expected revenue growth for the December quarter. We have created an interactive earnings forecast dashboard for Amazon where we have incorporated expected Q4 results. You can modify segment revenue and margin forecasts to gauge how any changes will impact the company’s expected results for the full year.

Is Low Revenue Guidance A Reason To Worry?

Amazon’s core e-commerce and complementing grocery, in-house products (Echo, Kindle) and subscription (Prime) revenues have continued their growth spree this year. Amazon’s net revenues rose around 40% on a y-o-y basis in each of the three quarters of the year. In the third quarter, North America revenues were up 35% to $34.3 billion while International revenues increased 13% to $15.5 billion. Amazon Web Services (AWS) kept up its growth spree with 46% revenue growth to $6.7 billion for the quarter. This has largely mirrored trends from preceding quarters.

On a positive note for the company, its reported operating income stood at $3.7 billion, up from only around $350 million in the comparable prior year period, and significantly higher than the guided range of $1.4-$1.7 billion. As a result net income and EPS also beat market expectations at $2.9 billion and $5.75 a share, respectively.

Despite the strong earnings, shareholders reacted negatively to the company’s revenue outlook for Q4. Amazon expects Q4 revenues to be “only” 10-20% higher on a y-o-y basis. With revenues expected to lie in the $66-$72 billion range, the company expects operating income to be around $2.1-$3.6 billion, which is much higher than historic levels.

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