Amazon’s shares dropped almost 10 per cent yesterday after the ecommerce giant posted a double-digit drop in profits.
Sales for the three months to September 30 rose 24 per cent year-on-year to $70 billion (£54.4 billion) thanks in part to another record-setting Prime Day.
Despite this Amazon’s net income dive-bombed 25 per cent to $2.13 billion (£1.66 billion) or $4.23 per share
This sharp drop was attributed to a “big investment” in its Prime delivery service, amid plans to half delivery times to one day across the US.
Over the three months Amazon invested nearly $10 billion (£7.78 billion), up more than 46 per cent from a year earlier.
“It’s a big investment, and it’s the right long-term decision for customers,” Amazon’s founder and chief executive Jeff Bezos said.
And although it’s counterintuitive, the fastest delivery speeds generate the least carbon emissions because these products ship from fulfillment centers very close to the customer — it simply becomes impractical to use air or long ground routes.”
Amazon also told investors that its performance over the coming vital holiday season would likely come below analyst expectations.
For the final quarter Amazon said it expected net sales to be between $80 billion (£62.1 billion) and $86.5 billion (£67.1 billion), falling short of predictions of $87.37 billion (£67.8 billion).
It also said it expected operating income to be between $1.2 billion (£930 million) and $2.9 billion (£2.26 billion) significantly lower than analyst estimates of £4.19 billion.
Amazon’s cloud computing arm Amazon Web Services (AWS), which has propped up its retail arms profitability in recent months, also showed signs of slowing growth.
Over the third quarter AWS saw sales growth of 35 per cent to $9 billion (£7 billion), slowing from growth of 46 per cent a year earlier.