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Amazon’s streak of record quarterly profits is over

But it is still the sixth straight profitable quarter.

Amazon CEO Jeff Bezos at the 2016 Code Conference Asa Mathat
Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.

For three straight quarters, Amazon posted a new record for profits, shooting fear into competitors who have mocked it for not making money. Well, the streak is over.

Jeff Bezos’s company did post a profit in the third quarter — $252 million, or 52 cents per share — but it was both below analyst estimates of 78 cents a share and well below the record quarterly profit of $857 million that Amazon reached in the second quarter.

The company’s forecast of fourth-quarter operating income of between $0 and $1.25 billion also is below analyst expectations, even at the top end, according to the earnings cheat sheet from RBC Capital’s Mark Mahaney. The company’s shipping costs rose 43 percent in the quarter as Amazon continues to speed up delivery times with offerings like the one-hour delivery service Prime Now.

Amazon’s stock was trading down 6 percent in after-hours trading.

In a call with reporters, Amazon Chief Financial Officer Brian Olsavsky noted that Amazon typically posts a smaller profit in the third quarter as it spends more money to prepare itself for the demands of the holiday fourth quarter. To that end, Olsavsky reminded reporters of the 18 new warehouses that he previously announced were going to open in the third quarter to handle the holiday rush. The company’s previous record for quarterly warehouse openings was 11, he said.

“There are certainly cost penalties to start up new warehouses,” he said.

Amazon’s CFO also reiterated that the company has been spending more on acquiring and producing video content that it streams to Amazon Prime and Prime Video members.

On the bright side, Amazon did meet revenue expectations with $32.7 billion in net sales for the quarter. Revenue in the Amazon Web Services business, which leases computing power and data storage to internet companies, grew 55 percent year over year to $3.2 billion. The AWS division continues to be the company’s most profitable, with operating income of $861 million in the quarter.

The third quarter also marked the sixth quarter in a row that Amazon has registered some profit.


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