Amazon.com, Inc. (NASDAQ: AMZN) stock fell over 1.7% (As of 12:46 pm GMT-4 ; Source: Google finance) as the company missed the earnings estimates for the second quarter of FY 19 and expects income would slump in the current quarter, as the online retailer ramps up spending on one-day delivery to spark sales growth. Amazon’s profit inched up to US$2.6 billion in the quarter, short of US$2.8 billion that analysts were expecting, according to IBES data from Refinitiv
AMZN in the second quarter of FY 19 has reported the adjusted earnings per share of $5.22, missing the analysts’ estimates for the adjusted earnings per share of $5.57. The company had reported the adjusted revenue growth of 20 percent to $63.4 billion in the second quarter of FY 19, beating the analysts’ estimates for revenue of $62.48 billion. The revenue from Amazon Web Services (AWS) came in at $8.38 billion, up 37% year-over-year. Although that’s fantastic growth, it failed to match consensus expectations of $8.48 billion in revenue, according to analysts surveyed by FactSet.
Moreover, the company also said its investment in faster shipping was starting to pay off. The company has drawn more than 100 million paid subscribers to its loyalty club Prime by releasing original TV shows, equipping more gadgets with its voice assistant Alexa and offering quick shipping for countless goods, including groceries from its subsidiary Whole Foods Market. Now, it is investing heavily to halve delivery times to one day for Prime members, to stay ahead of rivals such as Walmart Inc that have marketed two-day shipping without subscription fees. So far Amazon has expanded one-day delivery to more than 10 million items, a fraction of the 100 million-plus goods it offers in two days in the United States.
Additionally, the company is gradually moving away from low-margin retail toward a marketplace model, where it collects lucrative fees for helping other merchants on its site ship and advertise their products. Revenue from seller services grew 23per cent to US$12.0 billion in the second quarter, while ad and other sales increased 37per cent to US$3.0 billion.
On the other hand, the Trump administration is starting to clamp down on big tech, with the U.S. government announcing that it’s looking into whether major technology firms are illegally crushing competitors. And Amazon could end up in the crosshairs itself before very long.
In addition, though profitable, the dual retail and marketplace model has drawn scrutiny. Earlier this month, the European Commission launched an antitrust probe into whether Amazon’s use of other merchants’ data offered an unfair advantage to its retail unit, which has made private-label versions of popular products.