(Bloomberg) — Amazon.com Inc.’s second-quarter sales and forecast for the current period fell short of analysts’ expectations, suggesting that a pandemic-fueled stretch of rapid growth is waning for the biggest online retailer as people revert to old shopping habits. Shares fell about 7% in extended trading.
The Seattle-based company rallied through the pandemic as shoppers shifted much of their spending from stores to websites. Amazon invested billions on pandemic safety measures to keep operating while minimizing the spread of Covid-19 through its facilities and hiring hundreds of thousands of workers to meet crushing demand. New Chief Executive Officer Andy Jassy, who took the helm from founder Jeff Bezos on July 5, has to show investors he can continue the company’s rapid sales growth and rising profits amid the heightened scrutiny of regulators in the U.S. and Europe.
Investors overlooked better-than-predicted profits and a strong performance in the quarter from the company’s advertising business and Amazon Web Services cloud unit. Instead, they focused on slowing momentum for its central e-commerce business, said Pedro Palandrani, an analyst at GlobalX.
“The big thing investors are looking at is next quarter guidance came in much lower than expectations,” Palandrani said, adding that Amazon’s results stood out compared with the positive earnings reports issued earlier this week by Microsoft Corp. and other big tech companies.
Even before Amazon’s weak forecast, investors were fretting that the company could lose momentum as people revert to pre-pandemic spending habits like traveling and dining out, which may reduce online shopping. Amazon Chief Financial Officer Brian Olsavsky said the company is working to get more of its employees vaccinated and hopes the delta variant of the virus can be controlled even if that means “people are getting out more and doing other things besides shopping.”
Amazon continues to invest in building new facilities to meet customer demand, with some plants handling double the package volume they did just two years ago, he said. Second-quarter total operating expenses rose 27% to $105.4 billion, the company said Thursday in a statement.
Revenue will be $106 billion to $112 billion in the period ending in September, Amazon said. Operating profit will be $2.5 billion to $6 billion. Analysts, on average, projected $8.11 billion in profit on sales of $118.7 billion, according to data compiled by Bloomberg.
Second-quarter sales increased 27% to $113.1 billion, missing estimates of $115 billion. Profit was $15.12 a share in the period ended June 30, compared with the average estimate of $12.28.
Shares fell to a low of $3,325.06 in extended trading after closing at $3,599.92. The stock had gained about 11% this year through the close.
Bezos remains executive chairman and the exact nature of his new role is a work in progress. Bezos has said he wants to focus his attention on new initiatives, which suggests Jassy will oversee the day-to-day of Amazon’s business. Jassy previously ran the cloud unit.
AWS revenue jumped 37% in the quarter to $14.8 billion — the biggest year-over-year sales jump in two years. The company’s “other” revenue category, primarily advertising sales, gained 87% to $7.92 billion. Both units topped analysts’ estimates.
Amazon’s gains during the pandemic came from adding more Prime members, who pay monthly or annual fees in exchange for shipping discounts and other perks. Amazon had 153 million Prime members in the U.S. at the end of June, up 25% from a year earlier, according to Consumer Intelligence Research Partners. Prime members shop more frequently on Amazon and spend about twice as much on the site as non Prime members.
Despite big e-commerce investments by competitors that include Walmart, Target and Best Buy, Amazon remains the unrivaled e-commerce leader in the U.S., its biggest market. U.S. shoppers will spend $367 billion on Amazon this year, up 15.3% from 2020, according to EMarketer Inc. Amazon’s 40.4% share of all online spending in the U.S. is bigger than its next nine competitors combined.
The company continues to expand its workforce. It had almost 1.34 million employees worldwide as of June 30, up 52% from a year earlier. Olsavsky said Amazon is recruiting workers in a tight labor market by offering competitive wages and benefits.
(Updates with comments from CFO in the fifth paragraph.)
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