International e-commerce giant, Amazon reported a quarterly profit on Thursday, which set a record. This was fueled by the growth of online shopping all thanks to the big-billion days and its cloud-computing service AWS. Even though Amazon made profits, Wall Street analysts said that the revenue was less than expected and as a consequence, Amazon’s share fell after these results were released.
The Seattle-based company has seen a boost in its profits since it expanded far beyond online shopping. Since many years, Amazon posted very low quarterly profits which was the result of spending most of the profits on building warehouses and on other investments. But the game changed after the introduction of its cloud service AWS (Amazon Web Services unit), which provides cloud computing services to companies and government agencies, and users can pay for what they have used. This unit went on to become a major revenue-generator for Amazon.
The profits in the third-quarter profit were $2.88 billion (roughly Rs. 21,100 crores). A year ago, it reported a profit of only $256 million (roughly Rs. 1,870 crores).
Revenue rose by 29 percent to $56.58 billion (roughly Rs. 4.15 lakh crores), but this was less than the analysts expected $57.05 billion. Amazon’ shares, which were up by 50 percent so far this year, fell by 7 percent to $1,655.98 in extended trading on Thursday.
On the other hand, in the Amazon Web Services unit, revenue jumped 46 percent to $6.7 billion. In Amazon’ “other” category (made up of growing advertising business), revenue was more than double and reached $2.5 billion.
It is expected that Amazon will face higher costs since it is all set to boost the pay for all its US workers to at least $15 (roughly Rs. 1,100) an hour with effect from November 1. The company didn’t make any revelation about how much it will cost the company to boost the pay of US workers. On Thursday, analysts and reporters were on a conference call with Amazon’s Chief Financial Officer Brian Olsavsky, who declined to give a specific number on this cost to the company. About 400,000 workers at Amazon’s warehouses, which includes those at their Whole Foods grocery chain, will receive the pay boost.
Olsavsky said- “The company is expecting a strong holiday season.”
But analysts expected that the revenue would be close to $ 73.87, but it was somewhere between $66.5 billion and $72.5 billion for the fourth quarter. It looks like rival companies are all set to use this opportunity to go ahead of Amazon by copying their fast delivery technique and steal sales from them.
Companies like Target have started offering free two-day shipping with no minimum purchase in the upcoming holiday season that too for the first time.
But Amazon has already gained its loyal customers with the help of its Prime membership programme, wherein members would have to pay $119 a year or $12.99 a month to get access to various products, Amazon’s movie streaming service, fast delivery, and additional perks.
On Thursday, Olsavsky said that Amazon still has more than 100 million Prime members worldwide, even though the membership price was raised by 20 percent this year.