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Amazon Q3 2018 earnings: Record profit fails to impress Street as stock falls on sales and forecast miss

Amazon.com Inc. (AMZN) posted stellar earnings this Q3 2018 with upbeat net income but broke its spree of beating market estimates for net sales that it did for the past four straight quarters. The quarter also saw the e-commerce giant achieving a feat of joining the Trillion-dollar club with Apple (AAPL). But the miss in topline and in forecasts for the coming quarter was enough to take the shine off of the record profit, sending the stock down at least 6% in after-market trade on Thursday.

Quarterly net sales grew 29% to $56.6 billion generating a net income of $2.9 billion, growing eleven times its last-year income of $256 million. Earnings rose to $5.75 per diluted share from $0.52 per share a year ago.

This quarter also includes sales from Prime Day, one of Amazon’s biggest shopping events. Prime was a strong driver of Amazon’s subscription business, which grew 52% in the third quarter of 2018.

Amazon third quarter 2018 Earnings Infographic

On a year-over-year basis, the company’s revenue was expected to grow 30.2% to $56.9 billion and spur a 5-fold jump in earnings to hit $3.29 per share.

In the quarter before this, the company had delivered remarkable earnings growth which surpassed analysts’ expectations but sales missed the mark, despite growing 39% to around $53 billion.

Jeff Bezos, Amazon founder and CEO, said, “Amazon Business has now reached a $10 billion annual sales run rate and is serving millions of private and public-sector organizations in eight countries.”

Amazon Subscription Services YoverY sales growth trend

OUTLOOK
For the coming quarter (4Q 2018), the e-commerce giant expects net sales to be between $66.5 billion and $72.5 billion, growing 10-20%. An unfavorable impact of approximately 80 basis points from foreign exchange rates is anticipated for the quarter. Operating income is now seen be about $2.1-3.6 billion.

Amazon Q3 2018 earnings result
The 3rd-Gen Echo Dot (COURTESY: Amazon UK)

Amazon, this time around, had introduced a new family of its Echo devices: the next-gen Echo Dot, Echo Plus, and Echo Show, along with Echo Auto for cars.

The e-retailer also launched Prime Book Box to all US Prime members. The subscription service delivers curated children’s books each one, two, or three months for just $22.99 per box.

In July, Amazon bought PillPack for $1 billion in a disruptive move signaling that the giant is getting ready to take the highly-regulated healthcare industry. Post the deal announcement, CVS Health (CVS), Rite Aid (RAD) and Walgreens Boots Alliance (WBA) jointly lost more than $10 billion of market cap sending shivers across the pharma industry.

Amazon PillPack Acquisition

 

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