Amazon misses profit predictions for first time in 2 years

Amazon has seen its share price drop over 1.3 per cent after its profits came below analyst expectations for the first time in two years.

For the three months to June 30 the online retail giant saw a healthy revenue rise of 20 per cent to $63.4 billion (£50.9 billion) coming comfortably above analyst growth expectations of 17 per cent.

However, in a move that will be familiar to Amazon’s long-term investors, the company has been reinvesting its increasing profits into costly endeavours aimed at keeping it ahead of its rivals.

In April Amazon said it was due to invest $800 million (£620 million) over the second quarter to roll out the one-day delivery to all of its Prime customers.

Amazon’s investment in the scheme slightly overran its target according to its chief financial officer Brian Olsavsky, ending a four-quarter run of growth.

Amazon saw profit across its business edge up to $2.6 billion (£2.09 billion), missing analyst estimates of $2.8 billion (£2.25 billion), including a 15 per cent operating profit drop in its key North American retail arm.

READ MORE: Amazon to spend nearly $1bn halving Prime delivery times

Meanwhile its shipping costs during the period jumped 36 per cent, reflecting its ramped-up investment, to $8.1 billion (£6.52 billion).

According to GlobalData’s managing director Neil Saunders, this investment is aimed at securing its future against retailers which “have the advantage of allowing customers to pick things up the same day in stores” due to their physical retail footprints.

Elsewhere Amazon’s cloud computing arm Amazon Web Services saw a revenue rise of 37 per cent to $8.4 billion (£6.76 billion), marking the first time growth dipped below 40 per cent, while operating profit climbed 29 per cent to $2.9 billion (£2.33 billion).

Revenue from seller services also grew 23 per cent to $12 billion (£9.66 billion).

For the upcoming quarter Amazon said it expects operating income of between $2.1 billion (£1.69 billion) and $3.1 billion (£2.47 billion), down from $3.7 billion (£2.98 billion) a year earlier and well below analyst forecasts of $4.4 billion (£3.54 billion).

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