So much for retail therapy. After Amazon reported a weaker-than-expected third-quarter sales outlook on Thursday, sending its stock tumbling more than 7% after hours, a very sensible corporate executive presented an exclusive cause in a call with reporters.
Amazon Chief Financial Officer Brian Olsavsky said Amazon’s Internet traffic patterns mean shoppers are distracted by rare, primary news stories, such as the Olympics and the traditionally turbulent U. S. presidential race. -The United States, which has already included an assassination attempt against former President Donald Trump and President Joe Biden, is moving away from the race and, as a result, may simply postpone its purchases or even skip them altogether. Such monumental news events in the afterlife have made it “more difficult to predict,” Olsavsky said, and business leaders are once again grappling with that reality. Amazon said it expects profits of between $154 billion and $158. 5 billion for the current third quarter, a range that suggests sales will likely fall short of analysts’ average estimate of $158. 24 billion. .
Instead of looking for convenience in the “buy now” button, it seems that people who constantly shop are responding to the fast-paced news cycle by spending less. Amazon’s profits for the quarter ended June 30 were also slightly below expectations, at $148 billion, although profits were better than expected with a net profit pool of $13. 5 billion. . dollars. Although the number of products (or units) Amazon sold during the quarter was high, consumers preferred lower-priced pieces, according to Olsavsky and CEO Andy Jassy, who attended a conference call with analysts. Executives believe part of this trend is the result of economic concerns, but there is also something else at play. Amazon has invested heavily in speeding up delivery times to make consumers more reliant on the store to meet their needs. last-minute pieces, such as non-consistent and disposable foods, and familiar, attractive pieces that are sometimes affordable compared to other product categories such as electronics or clothing. The company is gaining market share in the consumables sector, but low average transaction costs are weighing on profits.
On a positive note for the company, profit expansion in Amazon Web Services’ cloud computing business continues to accelerate. The unit’s sales expansion accelerated to 18. 8%, up from 17. 1% in the first 3 months of the year, also driven by visitor spending on generative AI products and installations. than in more classic cloud infrastructure projects after an era of greater focus on costs. AWS visitor spending. Jassy reiterated his revelation from last quarter that generative AI is on track to generate billions in profits for AWS this year. To meet this and other renewed demands for cloud computing, Amazon is prepared to spend more on capital investments in the second part of the year than the $30. 5 billion it doled out in the first six months of 2024. The mammoth spending capital is in line with competitors like Microsoft, Alphabet and Meta, all of which have reported huge increases in their infrastructure investments in recent quarters. Amazon’s investments, Olsavsky said, are intended to “generate profits and loose cash for the next decade and beyond. ” »