It seems the Jeff Bezos magic may have run out (if only for the time being).
After several quarters of smashing expectations, moments ago Amazon tumbled as much as 9% after reporting EPS of $0.52, far below the $0.85 expected, on revenue of $32.7 billion, in line with estimates, and up 29% from a year earlier. Operating income also missed, printing at $575 million, below the $690.5 million expected.
The guidance was also troubling, with the company now expecting Q4 operating income between $0 and $1.25 billion, below the street’s expectation of $1.7 billion, on revenue of $42 to $45.5 billion, roughly in line with consensus of $44.6 billion.
The full guidance:
- Net sales are expected to be between $42.0 billion and $45.5 billion, or to grow between 17% and 27% compared with fourth quarter 2015. This guidance anticipates approximately 60 basis points of favorable impact from foreign exchange rates.
- Operating income is expected to be between $0 and $1.25 billion, compared with $1.1 billion in fourth quarter 2015.
- This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded.
Digging into the number we find that while the all important AWS generated net sales of $3.23 billion, above the $3.13 billion expected, growth slowed modestly from 58% to 55% Y/Y. In the quarter, AWS generate $1 bilion in profit, suggesting a 31.6% margin, well above the 25% from a year ago. AWS’ profit of $1 billion was more than the rest of the entire business combined generated.
Another curious highlight is that Amazon expects to create 120,000 seasonal jobs in customer fulfillment and customer service this holiday season. We hope the BLS keeps track of this and adjusts accordingly for the surge in temp-workers.
Still, none of this dented Bezos’ optimism who had this to say, which curiously was only focused on Alexa:
“Alexa may be Amazon’s most loved invention yet — literally — with over 250,000 marriage proposals from customers and counting,” said Jeff Bezos, founder and CEO of Amazon. “And she’s just getting better. Because Alexa’s brain is in the cloud, we can easily and continuously add to her capabilities and make her more useful — wait until you see some of the surprises the team is working on now.”
Despite the disappointing earnings number, cash flow hit a record $8.6 billion in Q3.
Additionally, free cash flow less finance lease principal repayments and assets
acquired under capital leases increased to $3.4 billion for the trailing
twelve months, compared with $637 million for the trailing twelve
months ended September 30, 2015.
Also, the company’s LTM operating margin remained flat at 3.2%:
However, in Q3, the picture was different, as the margin slid from 4.2%, the highest this decade to 1.8%, the lowest in the past year.
Also notable, as of Sept 30, Amazon employed some 306,800 workers.
For now the stock is not happy, plunging as much as 9% after hours, as much as 3 month lows, although it has since erased roughly half the miss.
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