Retail giant Amazon reported mixed results for the third quarter ended September 30, 2019. Amazon had net sales of $70.0 billion for Q3, a 24% increase over $56.6 billion in Q3 2018. Amazon Web Services (AWS) represented $9.0 billion of total sales, compared to $6.8 billion in Q3 2018. Operating income dropped to $3.2 billion, compared to $3.7 billion Q3 2018. Net income dropped to $2.1 billion, or $4.23 per diluted share, compared to $2.9 billion, or $5.75 per diluted share in Q3 2018.
Other highlights from the third quarter include the following:
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- Operating cash flow grew 33% to $35.3 billion for the trailing twelve months ended September 30, 2019, compared with $26.6 billion for the trailing twelve months ended September 30, 2018.
- Free cash flow increased to $23.5 billion for the trailing twelve months ended September 30, 2019, compared with $15.4 billion for the trailing twelve months ended September 30, 2018.
- Venture Beat reportedadvertising revenue of $3.6 billion, a 40% increase year-over-year.
- Amazon launched more than 20 new Fire TV products and expanded the lineup of programming available to Fire TV customers including the YouTube TV app, Apple TV app, and the new, free News app.
- Fire TV has 37 million active customers worldwide.
- Amazon and Discovery announced a partnership that brings the new Food Network Kitchen service to Amazon devices and makes Alexa the exclusive voice service for Food Network.
- GM announced plans to integrate Alexa into four of its brands: Buick, Chevrolet, GMC and Cadillac.
- The company introduced the all-new Eero mesh WiFi system.
- Prime Video won 15 Emmy awards for its original shows including Fleabag and The Marvelous Mrs. Maisel.
- Prime Video premiered four new Amazon Original series: The Boys, Carnival Row, Undone and Modern Love.
- For the third season, Prime members can livestream the NFLs Thursday night games.
- Amazon Music launched Amazon Music HD.
- Amazon announced The Climate Pledge, its commitment to meet the Paris Agreement 10 years early by achieving net zero carbon emissions by 2040.
In the earnings report, Jeff Bezos focused on the coming holiday season, rather than the companys financial results.
We are ramping up to make our 25th holiday season the best ever for Prime customers – with millions of products available for free one-day delivery, said Jeff Bezos, Amazon founder and CEO. Customers love the transition of Prime from two days to one day – theyve already ordered billions of items with free one-day delivery this year.
Its a big investment, and its the right long-term decision for customers. And although its counterintuitive, the fastest delivery speeds generate the least carbon emissions because these products ship from fulfillment centers very close to the customer – it simply becomes impractical to use air or long ground routes. Huge thanks to all the teams helping deliver for customers this holiday, added Bezos.
The company issued the following guidance for the fourth quarter of 2019:
- Net sales between $80.0 billion and $86.5 billion, representing growth between 11% and 20% over Q4 2018
- Operating income between $1.2 billion and $2.9 billion, compared to $3.8 billion in Q4 2018
The earnings report was released at 4:01 p.m. EDT on October 24. On that date, Amazon stock closed at $1,780.78. The next day, it dropped $19.45 to $1,761.33.
A CNBC article quotes several Wall Street experts and financial analysts who are not concerned that earnings fell short in the third quarter. This is the first drop in profits for Amazon in two years, and its costs have risen as it has invested in AWS, Prime Video and other lines of business. Its advertising revenue is increasing, putting the company third behind Google and Facebook, which is impressive. Amazons guidance is down for the fourth quarter, but Amazon does very well during the holiday season, with each one surpassing the previous one in terms of sales. We anticipate Amazon will finish out the year strong.