Amazon report strong revenue growth to over $56bn

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Amazon delivered revenue growth of 30% in its third quarter, taking the top line to $56.6bn. However, that figure is behind forecasts for the online retail giant, as it had been estimated to reach a shade over $57bn.

In addition, the group has guided investors to expect sales in Q4 to be between $66.5bn and $72.5bn. That is well behind prior expectations of $73.9bn, although it does factor in unfavourable exchange rate movements.

Operating income increased to $3.7bn, compared with $347m in Q3 last year, driven by strong growth in AWS and the North American retail division.

The shares fell 8.7% in after hours trading, more than erasing gains of 7% from earlier in the day.

George Salmon, Equity Analyst at Hargreaves Lansdown said: “These results contained the usual roll-call of successes around Prime, Alexa and AWS milestones, but the weak revenue growth stuck out like a sore thumb. It was particularly disappointing to see expectations for the fourth quarter come in on the light side too. The Christmas quarter is, after all, the most lucrative time of the year.

“However, investors shouldn’t forget Amazon is, despite its c.$800bn market cap, to all intents and purposes a highly rated growth company. And when you’re trading on 70 times expected earnings, it doesn’t take much to jolt the share price.

“For long-term investors, the fundamentals remain in place. The robustly profitable web services business carries on its merry way, while we’re pretty much at the point where for every two American dollars spent online, one is spent on Amazon. That’s driven the shares up so that the company recently surpassed the combined value of all US bricks & mortar retailers combined.

“But, it’s not just the US where Amazon’s bite is being felt, and on Monday the chancellor is widely expected to announce a form of digital sales tax here, with the aim of levelling the playing field for under pressure high street retailers. That’s unlikely to move the dial for Amazon just now, but if others follow suit, it might find its relentless growth a touch harder to come by.”

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