Amazon Stock Plunges After Big Miss on Q3 Profitability

After a big beat last quarter, the e-commerce and burgeoning content giant disappointed investors

Last Updated: October 27, 2016 @ 2:25 PM

For years, Amazon chose research and development of new products, from the Kindle to Echo, over posting gaudy quarterly numbers. But recently, it had been a profit machine — up until its third-quarter earnings fell well short of expectations.

After markets closed on Thursday, the e-commerce, cloud computing and burgeoning content giant reported revenue of $32.7 billion and earnings of 52 cents a share for the three months ended Sept. 30. That compares with $25.4 billion in revenue and earnings of 17 cents a share for the same period last year. It matched analyst estimates for revenue, which were $32.7 billion on average, but missed badly on earnings, which were expected to come in at 78 cents a share.

The multifarious company’s stock is down nearly 6 percent after hours.

Amazon does not break out Prime, its $99-a-year subscription service that gives customers access to pretty much the company’s entire ecosystem — which unlike the original Amazon ecosystem, is still expanding.

It includes everything from free two-day shipping on thousands of items to its Prime Music and Video services, the latter of which includes award-winning originals like “Transparent,” from its Amazon Studios. That unit also produced “Manchester by the Sea,” a Kenneth Lonergan drama that hits theaters Nov. 18 and is already garnering some Oscar buzz.

And to attract more eyeballs to its burgeoning catalog of original content, the company has unbundled its video from Prime, allowing customers to buy a standalone video subscription. That’s helped its Prime Video offering grow at a faster rate than rivals Netflix and Hulu, according to a Monday eMarketer report.

The e-commerce division got a boost last quarter from July 12’s Prime Day, a massive one-day sale that offered discounts on items ranging from its Echo smart speaker to toilet bowl lights. During the last earnings report, the company said this year’s Prime Day brought in 60 percent more revenue than last year’s.

Amazon Web Services, a cloud computing division that provides services to several major corporations — including Netflix, a rival in streaming video — also continued its steady growth. The unit reported third-quarter net sales of $3.2 billion, up from $2.9 billion in the previous quarter.

And because it’s Amazon, the company continues to pursue and develop new lines of business. Wednesday, Business Insider reported that the company had plans to open up to 2,000 grocery stores, beginning with a 20-store pilot program. The online retailer currently offers grocery delivery via its Fresh service, which is available to Prime members for a supplemental $14.99 a month fee.

One bright spot the company pointed out was the success of its Alexa voice software, which powers its Echo device.

“Alexa may be Amazon’s most loved invention yet — literally — with over 250,000 marriage proposals from customers and counting,” Founder and CEO Jeff Bezos said in a statement accompanying the earnings. “And she’s just getting better. Because Alexa’s brain is in the cloud, we can easily and continuously add to her capabilities and make her more useful — wait until you see some of the surprises the team is working on now.”

Amazon will hold a conference call to discuss the earnings at 5:30 p.m. ET.

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