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After two years of growth exceeding expectations, the wave of profits at Amazon is now coming to an end. Even though sales and profits have increased, analysts expected more.
Towards next-day delivery
Amazon reported sales of $63.4 billion (approximately €57 billion) in the second quarter of this year, about one-fifth more than a year earlier. However, the online retail giant sees its growth slowing.
During the quarter ended March, the number of items sold on Amazon increased by only 10%, compared to a 22% increase for the same period last year. This quarter, the number of products sold is up again, with an 18% increase.
The company therefore invested in new logistics services: in the United States, next-day delivery became the new standard for Prime members. However, during the second quarter, investments to keep this promise cost $800 million (€718.7 million). Costs were higher than expected and, according to the New York Times, Brian Olsavsky, Amazon’s CFO, also admits that there were productivity problems.
Earnings growth declines
As a result, net income amounted to $2.6 billion (€2.3 billion), or $5.22 (€4.7) per share. Analysts had forecast $5.56 per share. A year earlier, the profit for the same period was about $2.5 billion.
To date, profits have come mainly from Amazon Web Services, the group’s cloud services. Sales of this division reached $8.4 billion (€7.54 billion). Nevertheless, there is a slowdown in profits: for the first time in its history, annual growth has been less than 40%. The profit margin rose from 84% last year to 24%, which would be due to the strong growth – with a strong increase in the number of employees.
For the current quarter, Amazon forecasts sales of between 66 and 70 billion dollars (59 to 63 billion euros). Due to continued high investments in faster delivery services, operating income is expected to be significantly lower.
