Amazon invests massively to continue to grow, which seems too worried shareholders.Amazon (AMZN) on Thursday noted that its three-month income from the same period last year decreased by almost 28 percent over the same three-month period to $2.1 billion, as the company invests heavily in speedy supply.
Amazon’s shares fell by as much as 8% on Thursday after their profits were below Wall Street expectations.
In April, the company announced that it would spend $800 million in the next quarter to establish a single-day shipping standard for Prime members. Three months later, Amazon reported that the actual cost was even lower.
CEO Jeff Bezos stated that the investment would be worthwhile in the long run in a statement with his return on Thursday.
“Clients like Prime’s transition from two days to one day–this year they have ordered billions of items free of charge for one day,” Bezos added. The business shipping costs for the quarter hit $9.6 billion, up 46 percent from the previous year, as it tried to cut the standard delivery time to Prime by half.’ The move was massive, and the best long term choice for consumers.’
If that was not enough, over the quarter the headcount for Amazon rose by almost 100.000 full-time or part-time workers. Last month, Amazon organized a working day that sought to fill over 30 thousand positions.
CFO Brian Olsavsky said Thursday in an address to shareholders that the positions of delivery and storage were of particular interest.The company also expanded its employees in its cloud computing division, Amazon Web Services (AWS). He said businesses had increased their sales and marketing staff, as enterprises and government agencies are increasingly looking for a cloud transition.
Yet Amazon is experiencing difficult times with its finances. Slower growth faced by AWS, one of the critical drivers of revenue for the organization. The division posted sales of almost $9 billion, up nearly 35 percent year-on-year from the same time, but below its previous quarter growth.
AWS is a clear leader in cloud computing and is following a broader industry growth trend with the more widespread use of cloud computing. Earlier this week, Microsoft Azure’s rival AWS was also slowing growth— 59% in October, compared to 64% last month.
Amazon is investing heavily in fast shipping, and the lower than anticipated profit comes. The company previously reported that during the second quarter, it would invest $800 million to provide its Prime Members with unlimited one-day delivery options and effectively halve the standard shipment period.
Amazon CFO Brian Olsavsky said the move during a conference call following the statement on Thursday.
Olsavsky said on the call that “it provided a surprise for the process.” “This is what our work is now.” Charlie O’Shea, an analyst with Amazon’s tracking for Moody, described the significant investments in shipping for a day as “short-term pain for long-term income.” Although this may hurt profits now, he said it is a “necessary strategy to compete with the customer’s brick-and-mortar accelerating advantages.”
Amazon also confirmed over ten million Prime members last month that next day shipping is now open.
On the call, Olsavsky refused to explain in detail how one-day shipment’s availability shifts product choices to millions of clients. Yet he stressed that “several goods considered to our customers.” Amazon was now trying to improve consumer revenues with a combination of digital services, such as online storage and publicity, not just enabling consumers to order quicker and better shipping.
In the cloud computing market as the leader, Amazon Web Services has seen sales increase by 37 percent from the previous year to 8.4 billion dollars. Yet development slowly slows down in this market, as Microsoft and Google compete hardly.
The “other” segment of sales for Amazon, which is primarily marketing products, has reached an annual profit of $3 billion. The multi-billion dollar advertising business competes more and more with Facebook and Google.
Amazon has expanded its free delivery for more than ten million Prime members the next day with increasing competition from traditional retailers.
The deal is accessible in the U.S. “coast to coast,” the company announced from the end of Monday without a minimum purchase.
“From books, beauty and baby toys to appliances, dishes, and doggies, the most popular items of one day range,”
Amazon’s offering of two days free shipping has established the bar for years for online shopping convenience, and other retail giants have been able to rush.
In April the company reported spending $800 million on halving the supply gap.
In the United States, Amazon has set up a massive transport network of over 100 distribution centers, 100 shipping stations, and a floor of Amazon air freight aircraft.
According to Stuart Appelbaum, Chairman of Distribution, Wholesale and Department Store Alliance, the growing workload that comes with delivering orders on one day could be risky for the workers of the Amazon warehouse. An executive of Amazon suspected him of “falsehoods.” Large retailers ‘ stock prices, such as Walmart and Target, fell after Amazon agreed to expand its collection. Wall Street worries that Amazon rivals are going to push their thin bottom lines further to increase their shipments.