Amazon (AMZN) reported third-quarter sales and earnings results that missed Wall Street's estimates, reflecting a growth deceleration after the pandemic stoked a surge in online shopping last year and earlier in 2021.
The company also flagged that it would see additional costs as a result of supply chain challenges in the fourth quarter. Shares dropped by more than 4% in late trading.
Here were the main metrics from Amazon's report, compared to consensus estimates compiled by Bloomberg:
Revenue: $110.8 billion vs. $111.81 billion expected, $96.15 billion Y/Y
Earnings per share: $6.12 vs. $8.96 expected, $12.37 Y/Y
Amazon's key online store sales fell short of expectations in the third quarter, contributing to the slowdown in overall revenues. E-commerce sales were up 3% over last year to $49.94 billion, missing estimates for $51.53 billion.
At $110.8 billion, Amazon's overall sales were up 15% over last year, representing a marked slowdown from the prior quarter's 27% growth rate. Still, this was a fourth consecutive quarter of revenue topping $100 billion.
Amazon’s results did get a boost from its flagship Amazon Web Services cloud computing platform, which grew revenue by 39% to reach $16.1 billion. This high-margin business has been consistently outgrowing Amazon’s massive e-commerce unit, and its growth rate in the third quarter posted a surprise acceleration compared to the second. And revenue from Amazon's "other" business unit — which primarily comprises advertising sales — increased by 49% over last year, matching its rate in the same quarter of 2020.
Wall Street, however, homed in on Amazon's guidance for the fourth quarter, which included expectations for a jump in costs as a result of global supply chain shortages and freight concerns.
"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—all while doing whatever it takes to minimize the impact on customers and selling partners this holiday season," Amazon CEO Andy Jassy said in the company's earnings release. "It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”
For the current quarter, Amazon said it expects to see net sales come in at as much as $140 billion, missing estimates for nearly $142 billion, based on Bloomberg consensus data. It also said operating income could come in between breakeven and $3 billion, coming in well short of the $7.4 billion estimated.
The commentary and guidance appeared to vindicate investors' concerns around near-term challenges to Amazon as rising input costs and supply chain challenges ripple across the global economy. Labor costs and shortages were also in focus, as the the company ramped its hiring plans even further in the third quarter. Just last month, Amazon announced plans to bring on another 125,000 fulfillment and transportation employees at an average rate of $18 per hour, on top of another 40,000 corporate workers it announced it would be adding just weeks earlier. Overall, the company has added over 450,000 workers in the U.S. since the pandemic began.
Amazon's stock has underperformed the market since its latest earnings report in July, when the company had already offered a forecast for third-quarter sales that disappointed compared to Wall Street's expectations. At the time, Amazon's management attributed the deceleration to difficult comparisons to last year's results, which had been boosted by pandemic-related lockdowns.
Shares of Amazon dropped by 4.3% from July 29 through Thursday's close, lagging compared to the S&P 500's 4% gain during that period.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck