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Amazon Posts Record Profit, but Disappoints on Revenue and Outlook
Amazon Posts Record Profit, but Disappoints on Revenue and Outlook

Amazon reported another record quarterly profit Thursday, fueled by the growth of online shopping and its cloud-computing service.

But its revenue grew less than Wall Street analysts expected, and Amazon’s shares fell after the results were released.

The company, based in Seattle, has boosted its profitability as it expanded far beyond online shopping. For years, the company posted razor-thin quarterly profits, spending most of what it earned on building warehouses and making other investments. But that’s changed as its Amazon Web Services unit, which provides cloud computing services to companies and government agencies, has become a major moneymaker for Amazon.

Amazon posted third-quarter profit of $2.88 billion (roughly Rs. 21,100 crores), its fourth straight quarter of profits above $1 billion. A year ago, it reported profit of just $256 million (roughly Rs. 1,870 crores). On a per-share basis, it reported earnings of $5.75, beating the $3.29 per share analyst expected, according to Zacks Investment Research.

At Amazon Web Services, revenue jumped 46 percent to $6.7 billion. In its “other” category, which is mostly made up of its growing advertising business, revenue more than doubled to $2.5 billion.

Amazon is expected to face higher costs as it boosts pay for all its US workers to at least $15 (roughly Rs. 1,100) an hour starting November 1. The company hasn’t said how much the wage hikes will cost it, and Amazon’s Chief Financial Officer Brian Olsavsky declined to give a specific number when asked during conference calls with reporters and analysts on Thursday. About 400,000 workers at Amazon’s warehouses, as well as those at its Whole Foods grocery chain, will receive pay increases.

Looking ahead, Olsavsky said the company is “expecting a strong holiday season.” However, its revenue forecast of $66.5 billion to $72.5 billion for the fourth quarter, which includes the holiday shopping season, was below the $73.87 billion that analysts expected.

Rivals are hoping to steal some sales from Amazon by mimicking its fast delivery.

Target, for the first time, will be offering free two-day shipping with no minimum purchase this holiday season. But Amazon has already cemented loyalty with its Prime membership, in which members pay $119 a year or $12.99 a month for fast delivery, access to Amazon’s movie streaming service and other perks.

Olsavsky said Thursday that Amazon still has more than 100 million Prime members worldwide, even after raising its membership fees by 20 percent earlier this year.

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