Amazon forecasts lower operating income, shares dip

By

Susan Spies

Published
Feb 2, 2017

Amazon.com Inc forecast a greater-than-expected dip in operating income for the current quarter, a sign of its dedication to building expensive new warehouses and creating video content.

The world's largest online retailer also reported lower-than-expected fourth-quarter revenue and missed Wall Street targets for its closely watched cloud computing unit, sending its shares down more than 4 percent in extended trading on Thursday.

The Seattle-based company is spending heavily to take greater control of its delivery systems as well as expanding its video service around the world. Key to its plan is to entice sign-ups for Amazon Prime, its $99-per-year shopping club.

But the pace of investment has sometimes concerned investors.

Amazon forecast first-quarter operating income between $250 million and $900 million, below the consensus estimate of $1.34 billion, according to market research firm FactSet StreetAccount.
Amazon had reported operating income of $1.1 billion for the same period last year.

Amazon is now producing television shows for Prime subscribers to watch online. It is developing gadgets with an artificially intelligent assistant, Alexa, so users can buy toilet paper and other goods by voice command. And it is building out a system of trucks, planes and warehouses so orders are sped to Prime members in two days or less, a convenience that few online retailers can afford to match.
As part of its push for faster delivery times, the company said last month it would create more than 100,000 jobs in the United States.

Amazon is also the market leader in the fast-growing and lucrative cloud business, selling computer services, hosting websites and storing data.

That unit, Amazon Web Services, reported a 47 percent jump in revenue to $3.54 billion, but fell short of the average analyst estimate of $3.60 billion, according to FactSet StreetAccount.

Amazon said its net sales rose 22.4 percent to $43.74 billion in the fourth quarter, compared with the average analyst estimate of $44.68 billion, according to Thomson Reuters I/B/E/S.

Amazon's net income rose to $749 million, or $1.54 per share, from $482 million, or $1.00 per share, a year earlier.

The company said last month that the 2016 holiday period was its best-ever shopping season, when it shipped 50 percent more items than the prior year for third-party vendors.