Amazon Q3 earnings suffer as growth slows, costs rise

Supply chain woes are also costing Apple Inc - $6 billion in sales during the company's fiscal fourth quarter

Amazon.com warned Wall Street that it will have to spend billions of dollars hiring workers, paying them more and even speeding partly empty trucks to their destinations to ensure that supply-chain snarls don’t derail the holiday shopping season. 

The massive outlays could wipe out Amazon’s profit during the last three months of the year, executives said. The company also reported third-quarter revenue and earnings that fell short of projections. 

Revenue will be $130 billion to $140 billion in the period ending in December, the Seattle company said Thursday in a statement. Analysts, on average, estimated $141.6 billion, according to data compiled by Bloomberg. Operating income could be as low as zero, Amazon said, a step back for the company after reaping billions of dollars in profit each quarter going back to early 2018.

The results reflected the first period under new Chief Executive Officer Andy Jassy, who took the helm of the world’s largest online retailer from Jeff Bezos in July. Amazon shares have gained 5.8 per cent this year, underperforming the broader market, as consumers who turned to online ordering in record numbers during the pandemic began to resume in-person shopping, eating out and travelling. Amazon had signalled that slower sales growth — and high spending in areas such as wages and new warehouses —would persist through the end of the year. 

“In the fourth quarter, 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,” Jassy said in the statement. “It’ll be expensive for us in the short term, but it’s the right prioritisation for our customers and partners.”

Third-quarter revenue increased 15 per cent to $110.8 billion, compared with analysts’ average estimate of $111.8 billion. Earnings were $6.12 a share, down from $12.37 a year earlier, the company said. 

Amazon Web Services, the cloud-computing unit that brings in most of Amazon’s profit, posted sales of $16.1 billion, up 39 per cent. That’s the division’s fastest growth rate since early 2019.

Revenue from online stores, the company’s main retail business, increased just 3 per cent to almost $50 billion.