Amazon Shares Plunge 9% as Q3 Outlook Falls Short of Wall Street Expectations
Amazon shares plunged more than 9% on Friday following the company’s mixed second-quarter results and disappointing third-quarter forecast. The steep decline puts the stock on pace for its worst trading day of the year, erasing a significant portion of its gains for 2023.
Second Quarter Results
Amazon reported revenue of $147.98 billion in the second quarter, representing a 10% increase from the previous year. However, this figure fell slightly short of analysts’ expectations of $148.56 billion.
Net income for the quarter nearly doubled to $1.26 per share, surpassing estimates of $1.03 per share. This performance demonstrates the effectiveness of Amazon’s recent focus on cost-cutting measures.
The company’s cloud computing segment, Amazon Web Services (AWS), showed continued strength with revenue reaching $26.3 billion, exceeding analyst expectations.
Third Quarter Outlook
For the third quarter, Amazon forecasts revenue between $154 billion and $158.5 billion. The midpoint of this range, $156.25 billion, falls below the consensus estimate of $158.24 billion.
Amazon CFO Brian Olsavsky noted that consumers are increasingly “trading down” to lower-priced items and everyday essentials. This trend is impacting the company’s sales projections.
Olsavsky also cited a chaotic news cycle, including events like the Olympics and the upcoming presidential election, as factors distracting consumers and potentially affecting purchasing decisions.
Factors Affecting Consumer Behavior
The company observed softer-than-anticipated sales, attributing this to consumers’ tendency to opt for lower-ticket items such as everyday essentials and consumables.
These items tend to be cheaper and are used up on a regular basis, reflecting a cautious approach to spending among consumers.
Olsavsky pointed to several current events, including the Olympics, the presidential election campaign, and recent high-profile news stories, as elements contributing to a “tough quarter to forecast.”
Market Reaction and Analyst Perspectives
Despite the mixed results, several analysts remain focused on the performance of Amazon Web Services. The cloud computing segment has shown accelerating growth for three consecutive quarters.
Some analysts view Amazon as well-positioned to benefit from artificial intelligence developments and a potential shift back to cloud modernization.
The stock’s decline also comes amid broader market concerns, with a weaker-than-expected unemployment report contributing to investor unease about the overall economy.
