With Jeff Bezos now spending his time in outer space, things at Amazon (NASDAQ: AMZN) aren’t quite meeting Wall Street’s expectations.
Shares of Amazon were sent into a decline on Thursday, after the e-commerce giant’s second quarter earnings fell short of forecasts, suggesting that the bout of accelerated growth witnessed throughout the pandemic may be wearing off. The company’s revenue rose 27% in the second quarter, which is well below the 45% growth forecast by analysts. Net sales stood at $113.1 billion, significantly below estimates calling for $115.1 billion, while net sales at online stores missed the $56.71 billion estimate, and instead totalled $53.16 billion.
The Covid-19 pandemic fuelled a record surge in online shopping, as consumers opted to conduct their purchase via websites rather than brick-and mortar stores. This caused Amazon to embark on new spending initiatives aimed at mitigating the spread of Covid-19, and hiring a hoard of new workers to meet surging demand. However, now that the pandemic is receding and restrictions are lifting, consumers are beginning to revert to pre-Covid-19 spending habits, which may ultimately lead to a reduction in online shopping.
Earnings per share beat estimates of $12.28, and instead rose to $15.12, while Amazon Web Services reported a 37% increase in net sales, which stood at $14.81 billion and outpaced Wall Street’s forecast of $14.18 billion. But, it appears that investors may have overlooked the better-than expected strong performance, and instead zeroed in on Amazon’s decelerating third quarter guidance, which fell short of expectations.
Amazon is now forecasting that its third quarter profits will decrease relative to the same quarter a year ago, and is anticipating that its net sales will be between $106 billion and $112 billion— significantly missing Wall Street’s estimations of at least $118.75 billion. Similarly, the e-commerce company is also expecting its operating income to fall between $2.5 billion and $6 billion this quarter, also falling short of an $8.11 billion expectation.
The second quarter also saw Amazon’s free cash flow erode by 62% to a mere $12.146 billion, as the company embarked on a capital spending spree. The e-commerce giant spent a total of $26.3 billion in the first half of the year on more warehouses and data centers for its Amazon Web Services segment. The company’s operating margins fell from 8.2% in the first three months of the year— the highest in recent history— to a meek 6.8% last quarter.
Information for this briefing was found via Amazon. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.