This archive report was first published on 25 October 2019.
Amazon's quarterly earnings report, released on September 30, revealed a 27 percent decline in net income to $2.1 billion. The company's profits were pressured by its significant spending to accelerate most deliveries to one day, a move aimed at enhancing the Prime subscription service.
Despite the decline in net income, Amazon's revenue climbed 24 percent to $70 billion in the quarter, surpassing the $56.6 billion in sales logged in the same period a year earlier. The Seattle-based company's shares, however, took a hit, plummeting nearly seven percent in after-market trades following the release of the earnings figures.
Amazon's cost of sales skyrocketed about 33 percent, significantly eating into the company's net income. The retail giant has been investing heavily in its Prime service, promising a wide selection of items to arrive within a day of being ordered by its members.
"We are ramping up to make our 25th holiday season the best ever for Prime customers -- with millions of products available for free one-day delivery," said Amazon chief executive Jeff Bezos in the earnings release.
"Customers love the transition of Prime from two days to one day -- they've already ordered billions of items with free one-day delivery this year. It's a big investment, and it's the right long-term decision for customers," Bezos added.
Amazon has also positioned itself for the year-end holiday shopping season with a freshened lineup of Alexa-powered products, including wearable devices and a celebrity voice option for the popular digital assistant.
As one of the world's most valuable companies, Amazon has expanded its offerings beyond e-commerce to cloud services, streaming media, artificial intelligence, and brick-and-mortar grocery stores, with its own lineup of consumer electronics.
Analyst Andrew Lipsman at eMarketer described the quarterly results as "a very mixed bag for Amazon" with "a couple shining bright spots but also some clouds looming in the cloud business." Lipsman noted that the cloud computing unit AWS is experiencing "softening in growth rates," which could weigh on the company's profits if not reversed.
