Amazon beats Q3 earnings estimates, misses on revenue

Devin Lawrence
October 27, 2018

Amazon on Thursday reported third-quarter earnings that were more than $2 a share better than analysts had forecast.

Alphabet reported net profit of $9.2 billion, or $13.06 per share, compared with $6.7 billion, or $9.57 per share in the year-ago quarter. The company forecast an operating income range between $1.4 billion and $2.4 billion, compared with $347 million a year earlier. Analysts watch Amazon's revenue growth more closely than any other indicator of the company's future health.

But the company tempered that standout result with a revenue shortfall in the third quarter and a revenue outlook for the holiday period that was a bit lighter than analysts had forecast. The company also issued weaker than expected revenue guidance. Earnings easily beat expectations by 86%, but revenue missed analysts estimates by 1%.

Shares are up in early trade, at around 3.6%.

Alphabet shares lost ground after the earnings report and were down 5.04 percent in pre-market trading Friday.

Amazon's advertising business continues to go from strength to strength after reporting net sales of $2.5bn over the third quarter which can largely be attributed to advertising service sales, a figure which confirms the business is on the threshold of establishing itself as a rival to Facebook and Google.

In a time of low interest rates, Amazon and Google have offered investors the chance to hitch a ride on the fast-growing e-commerce, digital advertising and cloud-computing markets buoyed by a steady global economy, Bloomberg explained. That division saw sales jump 35% to $34.3 billion.

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Amazon said it expects fourth-quarter revenue to be between $66.5 billion and $72.5 billion, citing an "unfavorable impact" from foreign exchange rates.

On the brighter side was data that showed gross domestic product increased at a 3.5 percent annualized rate in the third quarter as a tariff-related drop in soybean exports was partly offset by the strongest consumer spending in almost four years and a surge in inventory investment.

While Amazon's sales forecast missed estimates, USA shoppers are projected to increase their online spending by as much as 22 per cent this holiday season, according to Deloitte Insights.

Those results were inflated by the company's acquisition of Whole Foods.

"With consumer sentiment and employment rates near 18-year highs and ongoing store closures in the USA, we believe Amazon's strong retail sales growth will continue through the balance of the year and beyond", the analyst added.

Amazon's strength will be a source of concern for the so-called duopoly who must now nervously look over their shoulders as their market share is eroded, with some advertisers beginning to pre-emptively switch as much as half of their budgets from Google to Amazon.

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