Despite Soaring Profits, Amazon's Core Business Growth Slows and Shares Slump

Sponsored Message
Learn More

Fri. October 26th, 2018 - by Robert Schaulis

SEATTLE, WA - Amazon announced some auspicious numbers this week. The e-commerce giant reported growth across virtually all metrics — with third quarter sales up 29% to $56.6 billion. The Washington Post declared that Amazon had achieved record profits during the period ending September 30, 2018.

Jeff Bezos, Founder and CEO, Amazon“Amazon Business has now reached a $10 billion annual sales run rate and is serving millions of private and public-sector organizations in eight countries,” said Jeff Bezos, Founder and CEO. “And we’re not slowing down—Amazon Business is adding customers rapidly, including large educational institutions, local governments, and more than half of the Fortune 100. These organizations are choosing Amazon Business because it increases transparency into business spending and streamlines purchasing, with increased control. The team is doing a fantastic job building and innovating for customers.”

Amazon announced third quarter sales up 29% to $56.6 billion

Highlights from Amazon’s third quarter fiscal report include:

  • Operating cash flow increased 57% to $26.6 billion for the trailing twelve months, compared with $17.0 billion for the trailing twelve months ended September 30, 2017. Free cash flow increased to $15.4 billion for the trailing twelve months, compared with $8.0 billion for the trailing twelve months ended September 30, 2017.
  • Common shares outstanding plus shares underlying stock-based awards totaled 507 million on September 30, 2018, compared with 503 million one year ago.
  • Net sales increased 29% to $56.6 billion in the third quarter, compared with $43.7 billion in third quarter 2017. Excluding the $260 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 30% compared with third quarter 2017.
  • Operating income increased to $3.7 billion in the third quarter, compared with operating income of $347 million in third quarter 2017.
  • Net income increased to $2.9 billion in the third quarter, or $5.75 per diluted share, compared with net income of $256 million, or $0.52 per diluted share, in third quarter 2017.

Despite Bezos’ insistence that Amazon isn’t slowing, though, many investors reportedly remained unconvinced. Amazon shares plunged, according to Reuters, amidst “signs that both [Amazon and Google-parent Alphabet] were beginning to face tougher competition from tech peers as well as the retail companies Amazon has bullied in recent years.”

The nine percent drop in shares reportedly diminished Amazon’s market value—however temporarily—by $80 million.

Quartz reported that, while still very much growing, the company’s “most important businesses [are] slowing.”

Amazon nonetheless projected robust targets for fourth quarter growth—declaring a net sales goal of between $66.5 billion and $72.5 billion—a 10% to 20% increase—and an operating income target between $2.1 billion and $3.6 billion, compared with $2.1 billion in fourth quarter 2017.

Brian Olsavsky, Chief Financial Officer, Amazon“Our guidance for the fourth quarter implies 10% to 20% growth and includes an 80-basis point unfavorable impact from foreign exchange,” said Brian T. Olsavsky, CFO, in a conference call held October 25th. “Once you adjust for the fact that Whole Foods, it was purchased in August of last year and that has impacted every quarter since then, Q4 will be the first solid non-Whole Foods comp since before we bought them since Q2 of last year.”

AndNowUKnow will continue to report with important retail news.