Amazon's Prime Day boost couldn't save it from disappointing sales

Amazon's Prime Day boost couldn't save it from disappointing sales

Amazon's Prime Day boost couldn't save it from disappointing sales

Revenue from Amazon's global business, which brings in 27.5 percent of total sales, was at the heart of the shortfall in results, growth halving to 13.4 percent compared to the previous quarter. Amazon said revenue was hurt by foreign exchange rate changes. In recent after-hours trading, the company's shares were off $157.16, or 8.8%, to $1,625.01. Earnings easily beat expectations by 86%, but revenue missed analysts estimates by 1%.

U.S. stocks plunged on Friday as grim earnings reports from Amazon and Alphabet rekindled a rush to dump technology and high-growth stocks, but data showing economic growth in the last quarter slowed less than expected provided some relief. Meanwhile, net income has increased to $2.9 billion in the third quarter, which is a big jump from the $256 million from this time past year.

In a bid to siphon shoppers away from Amazon, both Walmart and Target this week stepped up their free two-day shipping programs, which are available for customers without a membership fee. Amazon isn't disclosing the total cost of the raises. So far, Amazon has said that hasn't happened. The company also launched a new program to help people buy vans and start their own businesses making Amazon deliveries.

Amazon's bottom line is being affected by its heavy investment in cloud data centers and voice-based hardware, and by its decision to bump up its starting wage for United States workers to $15 an hour, amid criticism of low pay. As Amazon continues to surge thanks to more consumers spending more online, traditional retailers like Toys R Us and Sears have fallen into bankruptcy protection.

About 350,000 US Amazon employees and seasonal workers will see their wages increased, but that boost isn't expected to seriously crimp Amazon's bottom line. The company also issued weaker than expected revenue guidance. It meant Amazon was surpassed by Microsoft as the world's second most-valuable company.

Amazon reported net income of US$2.88 billion, or US$5.75 a share in the third quarter, from US$256 million, or 52 cents, a year earlier. In the holiday period previous year, Amazon saw sales of $US60.5 billion. Its not getting much attention but the unit has grown 123 percent YoY and this business is perhaps the highest margin in the entire Amazon stable. Its overall subscription revenue, which comes not just from Prime, but also from, Amazon Music, and other services, grew 52% from the third quarter past year to $US3.7 billion.

First published at 1:18 p.m. PT. Updated at 2:04 p.m. PT: Adds finance chief's comments.

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