Amazon reported weaker-than-expected revenue for the second quarter, sending shares down by as much as 6% in after-hours trading. The e-commerce giant also issued a disappointing forecast for the current period, citing cautious consumer spending and increased competition.
Hereâs a breakdown of Amazonâs Q2 performance:
Earnings: $1.26 per share, exceeding analysts' expectations of $1.03 per share.
Revenue: $147.98 billion, falling short of the $148.56 billion predicted by analysts.
While Amazon's cloud computing arm, Amazon Web Services (AWS), exceeded revenue estimates, reaching $26.3 billion compared to the expected $26 billion, its core retail business continues to face challenges.
The company's online store segment saw only a 5% year-over-year increase in sales, a significant slowdown compared to previous periods. This sluggish growth is attributed to heightened competition from discount sites like Temu and Shein, which offer cheap products from Chinese merchants to US consumers.
Amazon's finance chief, Brian Olsavsky, attributed the revenue miss to consumers opting for cheaper products, resulting in lower average selling prices (ASPs). He stated that consumers are being "cautious in their spending and trading down to lower ASP products."
To combat this trend, Amazon is reportedly launching a discount store featuring unbranded items priced below $20, targeting apparel, home goods, and other products.
Despite the challenges in its retail business, Amazonâs advertising revenue surged by 20% to $12.77 billion during the quarter, falling just short of estimates. The company's advertising unit has become a significant profit generator, competing with major players like Meta and Alphabet in the digital ad market.
Amazon's third-quarter guidance also reflects the current economic uncertainty. The company anticipates revenue between $154 billion and $158.5 billion, representing a growth rate of 8% to 11% compared to the same period last year. However, the midpoint of this range falls short of analyst expectations.
Amazon's operating income for the third quarter is expected to be between $11.5 billion and $15 billion, compared to $11.2 billion in the previous year. Analysts anticipate a higher operating income of $15.3 billion for the quarter.
The companyâs outlook is further impacted by external factors, with Olsavsky citing the Olympics and the attempted assassination of Donald Trump as events that have diverted consumer attention. He believes that these events have âmade it a tough quarter to forecast.â
While Amazon's financial performance in Q2 reflects a challenging market environment, the company's focus on cost-cutting and its continued growth in areas like advertising and cloud computing offer a glimmer of hope for the future. The coming months will be crucial in determining whether Amazon can navigate the turbulent economic landscape and regain its momentum.