Amazon quarterly profit rockets tenfold to US$2.9b

[SAN FRANCISCO] Amazon reported on Thursday that its profit in the recently-ended quarter rocketed to US$2.9 billion in a ten-fold increase from the same period last year.

Net sales at the e-commerce colossus climbed to US$56.6 billion in the third quarter, a 29 per cent increase from the US$43.7 in sales reported in the third quarter in 2017.

However, analysts had expected an even stronger performance by Amazon, prompting shares to sink 8.8 per cent to US$1,642.97 in after market trades that followed release of the earnings figures.

The Seattle-based company touted the growing popularity of Amazon Business, a service tailored as a source of all kinds of equipment and supplies for companies.

"Amazon Business has now reached a US$10 billion annual sales run rate and is serving millions of private and public-sector organizations in eight countries," Amazon founder and chief executive Jeff Bezos said in a statement released with the earnings.

"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."

Meanwhile, operating income from the Amazon Web Service cloud platform climbed to US$2.1 billion, nearly double that in the same quarter last year.

Amazon - which offers online shoppers a combination of ease, speedy delivery and choice that few can match - has faced criticism of its labour practices, including grueling working conditions and lack of job security.

It recently announced that effective November 1 its starting wage for US workers will be US$15 an hour, amid long-standing criticism of low pay, and that it would advocate for a higher minimum wage nationwide.

The raise will apply to 250,000 employees and to the more than 100,000 seasonal workers the company expects to hire for the holiday shopping season, it said.

Mr Bezos said the company - valued at nearly US$1 trillion - was heeding complaints about its pay structure.

RIVALS RAMPING UP

Amazon has become an increasingly diverse company since its start as an online book seller nearly 15 years ago, expanding to grocery stores, streaming television, cloud services and more.

The company's stellar growth apparently ramped up Wall Street expectations, with investors guessing Amazon would perform well and then selling off shares to pocket profits on the bet, according to independent analyst Rob Enderle of Enderle Group.

"Those kinds of earnings should have had everyone ecstatic," Mr Enderle said.

"I think we will find people will be more aggressive taking profit and locking in what they've earned because of uncertainty surrounding what the US administration might do next."

Increasing a company bottom line ten-fold is a good sign, and while Amazon's increasing diversity makes it tougher for investors to measure it also makes it more able to shrug off downturns in any one of its businesses, according to Enderle.

"As they move into more things, they will be better able to survive trouble," Mr Enderle said of Amazon.

GlobalData Retail managing director Neil Saunders said that while Amazon had enviable numbers, its net sales growth showed the weakest growth in a year.

Saunders saw increasing competition from rivals such as retail giants Walmart and Target as increasing the pressure on Amazon. GlobalData research showed that online shoppers are spreading spending out over more retail sites than they were a year ago, according to Mr Saunders.

"Make no mistake, Amazon remains a behemoth in the online market - nor do we believe it is under any serious threat," Mr Saunders said.

"However, others are now getting better at nibbling away at its dominance."

AFP