Positive numbers don’t always portend a positive market reaction and Amazon’s latest third-quarter earnings report reflects as such. Despite better-than-expected earnings, shares of Amazon fell after hours by 7% as of 5:45 p.m. ET.
Amazon’s earnings per share came in at $5.75 versus forecasts of $3.14, according to Refinitiv.
“We were particularly impressed by the continued YoY operating margin expansion, which is consistent with our view the company has transformed into a ‘profit machine,’ driven by multiple tailwinds (most notably AWS (Amazon Web Services), which posted an over 30% operating margin for the first time),” Loop Capital’s Anthony Chukumba said in a note published on Thursday.
However, revenue generated came in at $56.6 billion as opposed to the estimated $57.10 million expected by analysts. Adding fuel to the revenue miss flame was a weaker-than-expected fourth-quarter guidance, which came in between $2.1 billion and $3.6 billion–under the $3.8 billion estimate. Earlier this month, Amazon announced it would increase minimum wage to $15 per hour for all U.S. workers, which it factored into its fourth-quarter revenue guidance.
The online retailer’s total revenue climbed 29% as opposed to last year with sales up in North America by $34.3 billion or 35% from last year. Additionally, international sales were 13% higher than last year to $15.5 billion.
“Amazon continued to demonstrate that its various investments are resonating with its very broad and fast-growing customer base, with impressive results across the board,” Charlie O’Shea, Moody’s lead retail analyst, said in a statement.
With the month of October being a volatile one amid third-quarter earnings, Amazon’s results were especially important given the sell-offs occurring especially within the technology sector. If the after hours slide are an indication of Friday’s market session after the Dow Jones Industrial Average just posted a 400-point gain today, then the major indexes may be serving up another day of volatility in the red.
Related: Leveraged Tech ETF Takes Off as Dow Recovers
Stiff Cloud Competition
In the second quarter, Amazon delivered better-than-expected earnings of $5.07 earnings pre share as opposed to the consensus estimates of $2.50 EPS, attributing much of its growth to its high-margin business operations, such as its cloud computing service.
However, Canadian businessman and television personality Kevin O’Leary was quick to pinpoint that Amazon will face stiff competition moving forward as other tech companies enter the cloud computing space or enhance their existing services.
“There’s a lot of competition coming into cloud services and AI (artificial intelligence) and all kinds of support,” said O’Leary. “In the same way we got euphoric about Facebook, you have to come in with some caution to the fact they’re not the only player in town providing these services.
For more market news, visit ETFTrends.com.