The world’s largest online retailer, Amazon, expects surprisingly weak Christmas activity amid increased inflation and fears of a recession. The group expects sales in the last quarter of between 140 billion and 148 billion dollars, it announced on Thursday. That equates to meager growth by Amazon’s standards of between two and eight percent compared to the same period last year.
Analysts had expected significantly more. Investors dropped the share by more than 20 percent in a first reaction to the announcement of the figures. The profit forecast also caused disappointment. Amazon expects profits in a very wide range of $0 billion to $4 billion for the three months to the end of December.
In the last third quarter, the company earned $2.9 billion, a good nine percent less than a year ago. Although sales grew 15 percent to 127.1 billion dollars, they also fell below market expectations. Even Amazon’s lucrative cloud division, which provides storage space and online services to other companies, has seen slow growth.
Cloud growth slows
Amazon Web Services, the cloud industry’s flagship, increased revenue 27 percent to $20.5 billion. In the previous quarter, the increase was slightly less than a third. While Amazon says it is tightening its costs in the face of inflationary pressures on gasoline, energy and transportation, spending is growing faster than revenues. Operating expenses rose 18 percent to $125 billion in the quarter. In addition, Amazon – like many international US companies – is suffering from the strong dollar, which reduces foreign earnings on its balance sheet after conversion to domestic currencies.
Amazon’s CFO Brian Olsavsky announced in a conference call after the quarterly results that he would further cut costs: “We are taking steps to tighten our belts.” There are said to be hiring breaks in some business sectors, and the company is also looking to discontinue certain products and services and reconsider investments. However, austerity measures could slow down growth that has been relatively slow of late. Like the other big tech companies, Amazon is already struggling on the stock market: its share price has fallen by about a third since the beginning of the year. If it falls sharply on Friday, the stock market value could fall below the $1 trillion mark.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
