Amazon Stock Drops: Revenue Miss and Rising Costs

Amazon Stock Dips Following Q3 2021 Earnings Report

Despite its substantial market capitalization of approximately $1.75 trillion, Amazon’s recent financial performance has led to a decline in its stock price during after-hours trading. The company released its Q3 2021 results today, revealing that both revenue and profit figures fell short of analyst expectations.

Q3 2021 Financial Highlights

During the period ending September 30, 2021, Amazon reported revenues totaling $110.8 billion. This represents a 15% increase when compared to the same quarter in the previous year. Net income for the quarter reached $3.2 billion, translating to $6.12 per share.

However, analysts had anticipated revenues of $111.6 billion and earnings per share of $8.92. Notably, the company’s net income experienced a decrease of roughly 49% year-over-year.

As of this afternoon, Amazon shares have decreased by over 5%.

Looking Ahead: Q4 Guidance and Increased Costs

Although Q3 results missed projections, Amazon’s AWS unit demonstrated accelerating revenue growth year-over-year, offering a positive note for investors. However, the company’s outlook for Q4 may overshadow these trailing results.

New CEO Andrew Jassy addressed the anticipated costs in the earnings report. He characterized these expenses as investments focused on long-term benefits for customers. Despite this explanation, investors reacted negatively, resulting in a reduction of the company’s market capitalization by several billion dollars.

Nevertheless, considering Amazon’s net income exceeding $1 billion per month in Q3, it remains a financially robust organization.

AWS Performance: A Key Focus

Cloud revenues are of particular interest to observers at TechCrunch. Let's examine the data from Amazon’s AWS division:

AWS generated approximately $4.5 billion in new year-over-year revenue, alongside roughly $1.5 billion in additional operating income. Both AWS revenue and operating expenses increased by around 39% compared to the previous year.

Growth Metrics in Detail

The data highlights that AWS is currently Amazon’s fastest-growing segment. While the company is widely recognized for its e-commerce operations, its growth is now primarily driven by its cloud computing division. This raises the question of whether investors will eventually call for a separation of the two businesses to maximize shareholder value.