Amazon sales surge, but spending bites into profit

[SAN FRANCISCO] Internet colossus Amazon on Thursday reported profit shrank in the recently ended quarter despite surging sales as it poured money into growth.

The US-based company said that net sales increased 25 per cent to US$38 billion when compared to the same period last year, but that profit plunged 77 per cent from a year ago to US$197 million.

Investments, depreciation of equipment, share buys and other expenses ate into revenue in a familiar pattern of Amazon putting long-term growth ahead of short-term profit.

"Our teams remain heads-down and focused on customers," Amazon founder and chief executive Jeff Bezos said in a release.

"It's energising to invent on behalf of customers, and we continue to see many high-quality opportunities to invest."

Amazon has been expanding from its original mission as an online retailer to a diversified tech firm in cloud computing, online video, computer hardware and artificial intelligence.

The company also recently announced plans to acquire US grocer Whole Foods, which could help Amazon expand in that sector.

Mr Bezos noted recent company moves including launching a new version of home digital assistant Echo; upgrading Alexa artificial intelligence, expanding its streaming video offerings outside the US, and even adding to the company's air cargo fleet.

Amazon shares slipped some 3.3 per cent to US$1,010.50 in after-market trades that followed released of the earnings figures that fell short of Wall Street expectations.

The report comes as Mr Bezos briefly dethroned Microsoft founder Bill Gates as the world's richest person, according to an estimate by Forbes magazine.

An early jump in Amazon shares gave Mr Bezos a net worth of US$90.5 billion, half a billion ahead of Mr Gates, but by the end of the trading day Mr Bezos was back in the number two spot.

Amazon's recent online bargain event called Prime Day was touted as the "biggest global shopping event ever" for the company with record sales of its Echo, Fire tablet, and Kindle devices.

The company boasted that its video division recently received 16 Emmy nominations for original shows including "Man in the High Castle" and premier a slate of new offerings.

Revenue from its Amazon Web Services that hosts computing power and storage in the internet cloud rose to US$4.1 billion from US$2.9 billion in the same quarter last year.

AWS operating expenses climbed from US$2.7 billion to US$3.2 billion, but the division still saw operating income increase to US$916 million from US$718 million.

Amazon forecast a similar state of affairs for its financial performance this quarter, with net sales expected to grow 20 per cent to 28 per cent compared with the same period last year but operating income coming in lower.

AFP