Amazon (AMZN) Q3 Earnings Hurt By Investments, AWS Solid
Zacks Investment Research | Oct 27, 2016 11:28PM ET
Amazon.com’s (NASDAQ:AMZN) third-quarter 2016 earnings per share (EPS) of 52 cents were way behind the Zacks Consensus Estimate of 85 cents.
The earnings miss was primarily due to a spike in operating expenses, which increased mainly as a result of buildout of fulfillment centers in preparation for the holiday season. Costs also escalated due to the company’s increased spending on original TV shows and movies. Amazon Web Services (AWS) and India expansion-related expenses also resulted in higher spending.
The North America and AWS segments contributed to profits while investments in international continued.
Improvements in AWS were the result of operating efficiencies and increased utilization of assets. However, margins are likely to stay lumpy because of high levels of investing, price reductions and cost efficiencies.
The numbers in detail-
Revenues
Amazon reported revenues of $32.7 billion, up 7.6% sequentially and 29% from the year-ago quarter. Revenues were within the guidance range of $31-33.5 billion (up 6.1% sequentially and 27.2% year over year at the mid-point) and ahead of the Zacks Consensus Estimate of $32.6 billion.
Both product and service sales were up sequentially and year over year. Services grew much stronger than product sales from the year-ago quarter (up 50.5% compared to product sales growth of 21%). Revenue distribution between the two was 68%/32%.
In devices, Amazon increased Alexa integration with Fire TV, introduced a thinner, lighter and more feature-rich Kindle costing $79.99; added 50 new brands to the Dash Button, and started running exclusive offers for unlocked Android phones BLU R1 HD for $49.99 and Moto G4 for $149.99.
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