Amazon Shares Plummet On Slowing Sales
Amazon shares sink after it reports slowing sales amidst consumer bargain-hunting and competition from China’s Temu and Shein
Amazon’s shares sank over 8 percent percent on Friday after the company reported slower online sales growth in the face of competition from low-cost Chinese rivals such as Temu and Shein.
The e-commerce giant’s figures released on Thursday closed out a series of reports from the world’s biggest tech companies, which in several cases sent investors running for cover.
Shares in Microsoft and Google parent Alphabet sank on concerns over those companies’ massive AI infrastructure spending plans, while Intel shares dropped the most in 50 years after it said it would lay off 15 percent of its workforce and suspend its dividend.
Amazon’s online store sales rose 5 percent year-on-year in the second quarter to $55.4 billion (£43.3bn), down from 7 percent growth in the previous quarter, the company said.
Sales slowdown
For the third quarter Amazon projected sales of $154bn to $158.5bn, compared to analyst forecasts of $158.43bn, according to Bloomberg data.
It said operating income is expected to be $11.5bn to $15bn, compared to analysts’ expectations of $15.2bn.
Chief financial officer Brian Olsavsky said sales were under pressure due to consumers searching for deals along with competition from rivals such as Temu and Shein, which ship items directly from China at lower prices.
“We are seeing cautious consumers,” said Olsavsky. “They are looking for deals.”
Revenue at the company’s Amazon Web Services cloud unit rose 19 percent to $26.3bn, better than analysts’ expectations, in contrast to Microsoft’s Azure figures that fell short of market estimates.
Amazon chief financial officer Brian Olsavsky said AWS was headed for revenues of $105bn for full-year 2024.
Like competitors, Amazon is spending heavily on cloud infrastructure to meet demand for generative AI services, which require powerful back-end infrastructure.
AI investment
Olsavsky said the company spent just over $30bn in the first half on capital expenditures and said the figure would increase for the second half of the year, saying this was due to increased demand for AWS services, including generative AI.
Shares in Facebook parent Meta Platforms rose after it beat analysts’ expectations on revenue and profit, even as the company, like others, warned of “significant” capital expenditures into next year due to ongoing AI investments.
“We had a strong quarter, and Meta AI is on track to be the most used AI assistant in the world by the end of the year,” said chief executive Mark Zuckerberg.
