SAN FRANCISCO: Amazon.com Inc on Thursday (Oct 26) predicted a rise in holiday revenue that could still miss Wall Street expectations, buoyed by a recent marketing blitz, faster delivery and stabilising outlook for its cloud division.
Amazon shares rose as much as 5% in after-hours trading before turning negative to slip 0.3%.
Facing an array of challenges to its business, Amazon is trying to keep its mantle as the world's biggest cloud provider and online retailer.
The company has sought to bolster its cloud, answering rivals Google and Microsoft with a deal to invest up to US$4 billion in chatbot-maker Anthropic and touting an AI service drawing thousands of users.
“The retail giant’s slowdown last year appears to be in the rearview mirror as it has embarked on significant cost-cutting throughout this year and sharpened its focus on key growth areas,” Insider Intelligence analyst Zak Stambor said.
Amazon’s fortunes are, in particular, tied to those of its cloud-computing division. Long a major source of profit, Amazon Web Services (AWS) saw growth slow down in earlier quarters while it is tackling significant costs to meet its AI goals.
Amazon is facing off against Microsoft, the second-largest cloud provider by revenue, which beat Wall Street estimates this week as its customers geared up for AI upgrades.
Andy Jassy, Amazon’s chief executive, said in a statement: “Our AWS growth continued to stabilise.”
Amazon's revenue in the third quarter rose 13% to US$143.1 billion (RM685 billion), beating Wall Street estimates of US$141.41 billion, according to LSEG data. AWS brought in revenue of US$23.1 billion, compared with analysts’ expectations of US$23.09 billion.
For the current holiday quarter, the company forecast revenue in the range of US$160 billion and US$167 billion. However, analysts polled by LSEG were expecting revenue of US$166.62 billion, at the higher end of Amazon’s guidance.
In retail, Amazon has reorganised its delivery network to locate goods closer to shoppers, letting it fulfil orders faster than before, and more cheaply.
Amazon’s same-day delivery services is improving its margins by spurring shoppers to place more frequent and bigger orders. The retailer invested heavily in 2020 and 2021 to make the service available in more places.
“The retail division is sparking back into life, especially in North America,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
“There’s been a significant increase in the number of seasonal workers Amazon’s taken on in readiness for the Christmas rush, which bodes well for expectations around discretionary spending.”
Sales in Amazon’s North America segment increased 11% to nearly US$88 billion, and the company reported a US$4.3 billion operating profit in the business compared with an operating loss a year earlier. – Reuters