[Live: Amazon 2024Q2 Earnings Conference Call]
Amazon.com forecast current-quarter sales below estimates and said cautious retail consumers are seeking out cheaper options for purchases, sending shares down 7 per cent.
The after hours stock drop came despite second-quarter profit and cloud computing sales that beat Wall Street estimates.
Amazon's CFO Brian Olsavsky said in a call with reporters that consumers were being more cautious with their spending. "They are looking for deals," he said, noting that lower priced products were selling briskly.
CEO Andy Jassy on a call with analysts said that customers were trading down on price when they could.
Amazon’s online stores sales rose 5 per cent in the second quarter to $55.4 billion, compared with a 7 per cent gain in the first quarter.
One analyst said the softer retail sales were driving the post-market shares sell-off.
"They're showing continued momentum on cloud in terms of re-acceleration and so that's certainly where I think investors will be more positive, but the retail aspect is definitely what's weighing on the stock right now," said Charles Rogers, analyst at M Science.
Amazon shares had gained over 20 per cent this year through the session close on Thursday.
“We’re continuing to make progress on a number of dimensions, but perhaps none more so than the continued re-acceleration in AWS growth,” Jassy said in a release announcing the results.
Olsavsky told reporters it was difficult to make predictions for the third quarter because events like the presidential election and Olympics in Paris were distracting consumers. He said Amazon’s two-day discount sales event known as Prime Day in July was its “biggest ever” without providing specifics.
Like competitors, Amazon is boosting capital expenditures to invest in infrastructure for and development of artificial intelligence. Olsavsky said spending in this year’s first six months was about $30.5 billion, suggesting about $16.5 billion in the second quarter.
The Seattle retailer is playing catchup with rivals Microsoft, which partners with OpenAI, and Google, in developing its own so-called large language models that can respond nearly instantly to complicated queries or prompts.
It has rolled out a chatbot, dubbed Rufus, designed to help customers make purchasing decisions for specific purposes.
Both Google-parent Alphabet and Microsoft cautioned investors last month that expenses would remain elevated throughout the year to support developing pricey AI software and services. Investors took that as a signal that a payoff from the buzzy technology could take longer than originally hoped.
Amazon's cloud business, Amazon Web Services (AWS), reported a 19 per cent increase in revenue to $26.3 billion for the second quarter, surpassing market estimates of $25.95 billion.
The company expects revenue of $154.0 billion to $158.5 billion for the third quarter, compared with analysts' average estimate of $158.24 billion, according to LSEG data.
Amazon also missed estimates for advertising sales, a closely watched metric, as it ramps up competition with rivals Meta Platforms and Google. Sales of $12.8 billion in the quarter compare with the average estimate of $13 billion, according to LSEG data. The company earlier this year began placing ads in its Prime Video offering for the first time.
Still, Olsavsky said he was pleased with the advertising results. Those sales grew 20 per cent in the quarter.