Amazon shares fall on disappointing quarter - but AWS up 55%

Amazon reported disappointing quarterly profit but its AWS cloud business grew sales by 55% and is now 10% of the company's revenue

Amazon’s shares were down 5% in after-hours trading after it reported lower than expected profit for the third quarter and forecast disappointing revenue for the fourth quarter.

The company reported that third quarter revenues were up 29% to $32.7bn compared with a year ago, but profit rose only 19% to $252m as total operating expenses rose 28% to $32.1bn.

Revenue from Amazon Web Services (AWS) was up 55% to $3.23bn, beating the average estimate of $3.19bn and accounting for nearly 10% of total revenue for the quarter.

AWS yielded $861m in operating income, twice as much as in the same quarter a year ago, indicating increasing profitability as Amazon scales up the operation, according to The Seattle Times.

Amazon said the favourable impact from year-over-year changes in foreign exchange rates throughout the quarter on net sales was $52m.

The increase in operating expenses was due to increased shipping costs and the company’s investment in Amazon Web Services, its Prime service, warehouse and delivery infrastructure, and production of video content.

Investments in original video content appear set to continue, with Amazon Studios announcing a raft of new films and series in the coming months.

Amazon forecast revenue of $42.0bn to $45.5bn for the fourth quarter, representing a year-on-year growth of between 17% and 27%, but investors expected a higher forecast due to Christmas shopping.

Among the third quarter highlights, Amazon listed the announcement of its Amazon Women in Innovation Bursary at the University of Cambridge, University of Edinburgh, and King’s College, which provides scholarships for young women to pursue a degree in innovation-related fields.

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