Amazon’s results beat expectations

From Reuters Inc. posted third-quarter profit and revenue Tuesday that surpassed Wall Street expectations as the Web retailer slowed the growth of its technology spending.

The company also reported a sharp rise in electronics sales and rapid adoption of its Amazon Prime shipping program. The news came after the stock market’s close and pumped up Amazon’s shares 14% in after-hours trading.

Amazon, which sells items as varied as books, computers, diamonds and lawnmowers, said net income fell 37% to $19 million, or 5 cents a share, from $30 million, or 7 cents, a year earlier. Sales rose 24% to $2.31 billion.

But that beat the expectations of analysts, who on average had targeted earnings of 3 cents a share on sales of $2.25 billion, according to Reuters Estimates.


Third-quarter operating income of $40 million also topped Wall Street’s $32.7-million target.

Amazon has been seen as focusing on revenue growth at the expense of profit amid intense competition. In the process, it has scared off investors who wonder when its heavy investments will pay off.

Technology and content spending rose 42% to $172 million, but that represented a sharp deceleration from the 74% rise in the year-earlier quarter.

Stifel, Nicolaus & Co. analyst Scott Devitt said Amazon’s operating profit margin outdid Wall Street expectations.


“It’s low relative to recent history, but it was above expectations. That’s why the stock is up so much after hours,” he said.

North American sales rose 21% to $1.26 billion, while international sales rose 29% to $1.05 billion.

Worldwide electronics sales rose 43% to $699 million, accounting for 30% of worldwide net sales, up from 26% a year earlier.

Chief Executive Jeff Bezos said he was pleased with the rapid adoption of Amazon Prime, a membership shipping program that is costly to the company but aims to bring in new customers.


Yet Global Crown Capital analyst Martin Pyykkonen was skeptical about whether the business had changed dramatically in the quarter.

“It’s not as though in the third quarter they figured out a new formula for how to be more profitable because their outlook for the fourth quarter is in line” with analyst estimates, he said.

Amazon said it expected fourth-quarter sales of $3.63 billion to $3.95 billion, while Wall Street had forecast revenue of $3.69 billion. It also projected operating earnings of $145 million to $235 million for the fourth quarter, while Wall Street predicted $178 million

Amazon shares rose to $38.38 after hours from a close of $33.63, up 75 cents.