Amazon posted a 15% rise in revenue for the third quarter, its slowest growth in more than six years, and it missed Wall Street expectations on the top and bottom lines — and CEO Andy Jassy said the online retailing giant expects to incur several additional billions of dollars in costs in Q4.
Total sales increased 15% to $110.8 billion in Q3, whereas the company’s revenue had grown 27% in Q2 and 44% in Q1. Net income decreased to $3.2 billion in the third quarter, or $6.12 per diluted share, compared with $6.3 billion, or $12.37 per diluted share, in the year-earlier period.
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The slowdown was expected, but Amazon revenue still came in under forecasts. On average, financial analysts expected Amazon to post Q3 revenue of $111.6 billion and EPS of $8.92, per Refinitiv data. The company’s stock was down 4% in after-hours trading on the miss.
“We’ve always said that when confronted with the choice between optimizing for short-term profits versus what’s best for customers over the long term, we will choose the latter — and you can see that during every phase of this pandemic,” Jassy, who assumed the top post in July after founder Jeff Bezos stepped aside, said in prepared remarks.
In Q4, Jassy said, “we expect to incur several billion dollars of additional costs in our consumer business as we manage through labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs — all while doing whatever it takes to minimize the impact on customers and selling partners this holiday season. It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”
Amazon projected net sales for Q4, typically its biggest of the year because of the holiday-shopping season, to be between $130 billion and $140 billion, or to grow between 4% and 12% year over year.
For the third quarter, Amazon subscription services revenue (which includes Prime memberships) was up 24%, to $8.15 billion. Growth in its “other” segment, which primarily comprises ad sales, was a healthy 50% year over year, to reach $8.09 billion. AWS, the cloud services division that Jassy previously oversaw, continued on a solid growth curve, with revenue rising 39%, to $16.11 billion.
Amazon in May announced a $8.45 billion bid for MGM, which is still pending regulatory approval. The ecommerce giant hopes to create new spinoffs based on MGM’s intellectual property.
As of the end of Q3, Amazon had 1.468 million employees, up 30% from the year prior. The company said it paid $750 million cash in income taxes in the quarter, versus $502 million in Q3 2020.