Company - - Feb 03,2017
The Online retailer reveals 55% rise in year-on-year profit; however, a 22% crash in revenue couldn’t match Wall Street’s expectations.
Amazon experienced a bumper holiday since the online retailer announced a 55% surge in fourth-quarter profit on Thursday for the three months ending on 31 December. However, the firm’s share price chopped in after-hours trading after the retail giant scarcely missed Wall Street’s sales expectations.
The free-spending company, Amazon, has invested greatly in new projects and infrastructure to meet bloating demand as the craze for online shopping grows wider.
According to RJ Hottovy, senior retail analyst at Morningstar, part of the revenue slip might be due to ongoing shift on becoming a third-party marketplace. He added, "When that happens, you're not getting as much of the revenue in there."
Amazon’s shares fell more than 3% after the company announced that its revenues for the closing three months of 2016 were $43.74bn, higher by 22% from last year but short of the $44.68bn mark expected by analysts. Moreover, the first-quarter revenue guidance was also lower than the expected value.
Chief financial officer Brian Olsavsky said, “Our shipping costs are tied to the increase in that [fulfilled by Amazon] percentage, and that growth of Amazon-fulfilled units".
The retail & services firm mentioned on a conference call, it has invested in twenty-three new fulfillment centers during the second half of the year, expansion into India counted as Amazon's biggest investments and Academy Award-nominated original content with pricey talent, Alexa and Echo devices. Moreover, the company was also stressed by foreign exchange rates.
Amazon Web Services, a cloud-computing service that hosts different companies including AirBnB and Netflix, is the firm’s most lucrative and fastest growing division. The revenues reported from this division were $3.53bn versus the expected $3.6bn.