Amazon’s run of record earnings comes to an end, and the stock is falling - MarketWatch

Amazon.com Inc.’s run of record-high earnings came to an end Thursday, and shares fell in late trading despite strong sales growth. Amazon












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 ported second-quarter earnings of $2.6 billion, or $5.22 a share, up from $5.07 a year ago but lower than analysts’ estimates. Revenue was $63.4 billion, up from $52.9 billion a year ago, with the Amazon Web Services cloud-computing business accounting for $8.38 billion of that total. Analysts on average expected Amazon to report earnings of $5.56 a share on sales of $62.52 billion, with $8.48 billion credited to AWS, according to FactSet. Amazon shares fell more than 2% in after-hours trading following the release of the earnings report. Shares closed Thursday with a 1.4% decline at $1,973.82, but have gained 31.4% so far this year as the S&P 500 index












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 has gained 20.5%. Amazon reported record profit of more than $10 billion in 2018, more than three times its previous high, as previous profligate spending slowed down. In the second quarter a year ago, Amazon reported record quarterly profit, topping even high-volume holiday-shopping periods, and executives specifically cited a slowdown in spending at the time. Amazon had beaten that profit total for a new record in each of the three quarters since, until Thursday’s report broke that streak.
















Management has signaled that spending will ramp back up, however: In discussing first-quarter results earlier this year, Chief Financial Officer Brian Olsavsky revealed that Amazon planned to spend about $800 million to get Prime subscribers’ deliveries down to a one-day wait, and the company said during the quarter that it planned to spend another $700 million on employee training. That led to a disappointing forecast for second-quarter operating profit, which it hit. The company’s spending increased mightily in a variety of areas. Amazon reported that it spent $9.27 billion in the quarter on fulfillment, up nearly 17% from a year ago; $4.29 billion on marketing, up 48%; and $9.07 billion on technology and content, including rights for the Amazon Prime streaming service, up 25%. Overall operating expenses were $36.34 billion, up 18.6%. AWS revenue missed consensus analyst estimates by about $100 million, but the cloud-computing segment’s operating income was again the majority of Amazon’s total. AWS had operating income of $2.12 billion, while the entire company’s quarterly operating profit came in at $3.08 billion. For the third quarter, Amazon predicted revenue of $66 billion to $70 billion, with operating profit of $2.1 billion to $3.1 billion, which would be down from $3.7 billion a year ago. The quarter began with Prime Day, Amazon’s attempt to establish a shopping holiday in the summer months that the company had already said exceeded sales from Black Friday and Cyber Monday combined.























An event like that will typically boost revenue, but could weigh on profit margins as Amazon sells discounted items and ramps up one-day delivery. That is one reason analysts have warned investors to expect sales to increase this year, but profit may be an issue. “We expect the Amazon narrative to shift back more toward top-line growth in the second half of 2019, which in our view is important as Amazon remains a growth story and it’s too early for the company to be in harvest mode,” JPMorgan analysts wrote in a note earlier this month.




































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