Amazon is “batting down the hatches”

Amazon envisions a bleak end-of-year period. For many consumers, the current economic situation is “uncharted” territory, so the e-commerce giant harbours low expectations. Last quarter disappointed as well.

Slowdown period ahead

It’s time to “batten down the hatches”, Amazon founder Jeff Bezos hinted on Twitter earlier this month. CEO Andy Jassy is now doing exactly that, by issuing lower-than-expected forecasts for the important year-end quarter. Amazon expects fourth-quarter revenue between 140 and 148 billion dollars, which is no less than 15 billion dollars below analysts’ forecasts. Jassy is also very cautious about operating profit, which could end up anywhere between zero and 4 billion dollars.

Many consumers are in “uncharted waters”, CFO Brian Olsavsky believes, referring to skyrocketing inflation and energy prices. A lot of people are reassessing their purchasing power, just as Amazon itself is doing. The company is seeking to cut warehouse and logistics costs, pauses new hires and halts innovation projects. For instance, Amazon recently pulled the plug on Scout, a delivery robot the company was developing. “We are preparing for what could be a slower growth period,” Olsavsky told the Financial Times.

Final shopping flare-up

In the past third quarter, revenue rose 15% to 127.1 billion dollars, also slightly weaker than expectations. Net profit slumped to 2.9 billion dollars. The e-commerce segment saw growth again (+7%) after two quarters of decline and accounted for 53.49 billion dollars, but Amazon warns that consumers may be cutting back as of now.

Amazon’s business customers, who buy cloud services there, were already doing so as customers sought to cut variable costs. However, some areas remain safe from skimping: on launch day, 25 million people watched Rings Of Power, the Lord of the Rings spin-off that cost Amazon Prime Video 1 billion dollar to make.