Amazon (NASDAQ:AMZN) revealed mixed numbers after the closing bell last night. Revenue increased by 20% on a year-on-year basis to $63.4 billion, and the forecast was $62.5 billion. The group has invested heavily in the Prime Service with the aim of bring down the delivery time, and that weighed a little on profit margins. Quarterly earnings dropped back to the softest level in one year. EPS came in at $5.22, which undershot the forecast of $5.57. The company’s cloud business, Amazon Web Services, registered a 37% rise in sales to $8.38 billion, which narrowly missed forecasts. It is worth noting, the revenue of the division grew by 41% in the first-quarter, and the cooling growth rate is a little concerning. Amazon’s third-quarter operating income projection missed forecasts as the group aims to earn between $2.1 billion and $3.1 billion, while the consensus estimate was $4.4 billion. Overall, the numbers were impressive, but the cloud business is no longer growing at a phenomenal rate across the board. The investment in the Prime Service should pay off in the medium-term.
The pain felt by high street retail is partially due to the rise of online shopping, and to be more precise, Amazon. The group has been major disruptor to the retail sector and that trend is likely to continue as the fragile consumer climate across a number of major economies will probably lead to consumers becoming savvier, and that should benefit Amazon.
Amazon are seeking to cut down on their delivery times. The Amazon Prime service already offers one-day delivery, and in some cases same-day delivery, but that is on orders above $35, and now the group is aiming to introduce a next-day delivery service without minimum price. Such a move should draw in even more clients, and in turn put even more pressure on traditional retailers.
US Treasury Secretary, Steven Mnuchin, has attacked Amazon by stating the group has ’destroyed retail industry’. It does not bode well for Amazon that they have attracted the ire of the Trump administration, and Mr Mnuchin said he is looking forward to the Justice Department’s investigation into the alleged anticompetitive practices. The US government and the EU have become concerned the tech giants are wielding too much power, and have an uncompetitive advantage. Amazon has been criticised for its dual role as competitor in the market place it was created for other vendors. To look at the share price in action in recent months, you wouldn’t know an antitrust probe is looming over the firm, and it suggests that traders are not that worry about the probe.