Amazon Falls After Miss on Revenue and Guidance

The third quarter earnings for Amazon beat Wall Street expectations, but revenue and the outlook of the current quarter came up short of estimates dropping the online giant’s stock close to 9% in trading afterhours.

Amazon posted third quarter earnings per share of $5.75 while analysts were expecting $3.14. Revenue during the quarter reached $56.6 billion while Wall Street was expecting $57.10 billion and Amazon Web Services revenue ended at $6.68 billion while analysts were expecting a slightly higher $6.71 billion.

The company’s guidance for its ongoing fourth quarter for revenue was $66.5 billion to $72.5 billion far below Wall Street’s expectation of $73.79 billion. The final quarter of the year is the most important period for sales for Amazon due to the holiday shopping season.

The outlook shows how the online giant could experience a disappointing season during the holidays as overall business goes through a slight growth deceleration.

However, at the same time, the high-margin businesses’ growth has been highlighted such as its advertising and cloud units that are much more profitable than is the core retail sector.

Its income guidance for the fourth quarter of between $2.1 billion and $3.6 billion was below expectations on Wall Street of $3.91 billion. Amazon indicated that a wage increase it announced earlier in October had been incorporated into its guidance, but did not quantify the impact it made.

Total revenue was up 29% from the same quarter one year ago. Sales in North America reached $34.2 billion which were up 35% from the same three months last year and international sales expanded by 13% to end the period at $15.5 billion.

Amazon Web Services continued impressing investors surging by 46% in its sales, although it still came up short of expectations. The “other” category at Amazon, which is comprised mostly of its advertising business, was up an incredible 123% to end the quarter with $2.5 billion of revenue.

Net income grew by over 10 times from the same period last year to $2.8 billion, which is the fourth consecutive quarter it topped $1 billion. The operating income of $3.7 billion easily beat Wall Street’s expectations of $2.1 billion.

The growing profits are driven for the most part by growth in the high-margin Amazon businesses, including advertising, cloud and its third-party seller services.

Amazon shares are up close to 49% year to date.