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Amazon disappoints investors with plunging profits

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Amazon (s AMZN) disappointed investors Thursday, reporting second-quarter earnings slightly below Wall Street expectations. Net income plunged 96 percent to $7 million, or $0.01 per share, down from $191 million this time last year. The company attributed $65 million of its net loss to the acquisition and integration of Kiva Systems. Shares were down 4.4 percent in after-hours trading at 4:25 PM.

Amazon reported $12.83 billion in revenue, up 29 percent over last year and falling slightly below estimates of $12.9 billion. Operating income was $107 million, down 47 percent over last year.

Investors have been concerned about the cost of Amazon Prime, which — as Jeff Bezos claims in the press release — “is now the best bargain in the history of shopping,” its price of $79 unchanged since it was introduced seven years ago. (Does that mean we can expect a price hike sometime soon?) Amazon Prime, which offers members free two-day shipping on 15 million items, now also includes access to 18,000 streaming movies and TV episodes and 170,000 ebooks in the Kindle Owners’ Lending Library.

Amazon’s third-quarter guidance projects an operating loss between $350 million and $50 million. The company is expected to introduce up to six new tablets this fall and is rumored to be developing a smartphone. CFO Tom Szkutak said in an investor call following the earnings report that mobile is seeing “strong tailwinds…that we expect will continue.”

Amazon says the Kindle Fire is still its #1 bestselling product and that the top 10 bestselling items in the quarter were “digital products — Kindle, Kindle books, and accessories.” (That’s up from 9 out of 10 last quarter.) As usual, the company shared no actual sales numbers in its release.

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4 Responses to “Amazon disappoints investors with plunging profits”

  1. I think disappointment is the right response. $12.8 billion in revenues and net income of just $7 million. Compare that with Apple’s performance. How can Amazon have such a huge market share and make so little money?

  2. HeyThereHowsItGoing

    So, they reach 99.45% of their target (12.83 VS 12.9) and this is considered a ‘disappointment? What am I missing? If I had a wife that was disappointed when i hit 99.45% of my goal, I would laugh.