Amazon’s third quarter earnings missing their targets is the price of growth
The earnings reported by online retail giant Amazon.com Inc. missed its mark in the third quarters. The analysts however have remained upbeat and attributed this shortfall to the price it has paid for growth.
The shares of Amazon saw a fall on Friday of 6.3% in the premarket trade after the announcement of the results. As per the chief financial officer of the company, Brian Olsavsky, Amazon had exceeded the amount of spending of $800 million which the company had said it was going to spend in the previous quarter for putting up one-day shipping and had also made a large additional investment. He further said that there are going to be more costs in future.
He said that heading into the fourth quarter, they had added a penalty of $1.5 billion in the Quarter 4 for cost of shipping which is basically a transportation cost for the expansion of their transportation capacity in addition to adding more roles and shifts in the warehouses.
The CFO said that the company was elated with the customer response to one-day shipping which was evident from the acceleration in revenue and also the acceleration in unit growth.
The one-day shipping has also become an important tool of the company to attract more Prime members. The CFO said that they have seen a spike in the number of orders that have been made by the members Prime as the members begin to spend more with one-day shipping.
He also added that the company is also going to continue its investment in AWS.
The analysts have said that the numbers maybe worrying but there is cause for optimism with the investments that have been made.