Heavy Growth Puts Drag on Amazon's Bottom Line

Grow Your Business, Not Your Inbox

Stay informed and join our daily newsletter now!
2 min read
This story originally appeared on Fortune Magazine

Amazon reported a disappointing third quarter on Thursday in the period leading up to holiday season. Investors responded by pummeling the stock in after-hours trading, driving it down 10% to $280 a share. Here are the key points from the earnings report.

What you need to know: Amazon traditionally funnels much of its profits into expanding its already gargantuan business, resulting in razor-thin margins — and this quarter proved no different. The e-commerce giant reported a $437 million loss on revenues of $20.58 billion, a 20% revenue increase year-over-year, but well below Wall Street’s estimate of $20.84 billion.

A significant chunk of that money went into content and technology — a spending area that jumped 40%. That’s unsurprising given Amazon’s announcement last quarter that it would spend over $100 million on original video content, including the well-received original TV show, “Transparent” with “Arrested Development” actor Jeffrey Tambor.

The big numbers: $27.3 billion and $30.3 billion. That’s the sales range Amazon expects for this holiday season, the company’s busiest time of the year. That represents growth of between 7% and 18% versus last year, but again, less than what analysts forecast.

What you might have missed: Amazon had an extremely busy summer. It acquired Twitch, the video-game streaming site, for $1.1 billion, unveiled a credit card reader for the smartphone called Amazon Local Register and brought its same-day grocery delivery service, Amazon Prime Fresh, to New York. Amazon also launched the Fire phone, which is widely believed to be a dud. On Thursday’s earnings call, CFO Tom Szutak suggested it was too early to call the Fire phone a failure given its launch just 90 days ago. Said Szutak: “When ever you launch something new, there’s a wide range of outcomes, but it’s also early.”

More from Entrepreneur
Our Franchise Advisors will guide you through the entire franchising process, for FREE!
  1. Book a one-on-one session with a Franchise Advisor
  2. Take a survey about your needs & goals
  3. Find your ideal franchise
  4. Learn about that franchise
  5. Meet the franchisor
  6. Receive the best business resources
Save on an annual Entrepreneur Insider membership through 5/8/21. For just $49/yr $39/yr, you’ll enjoy exclusive access to:
  • Premium articles, videos, and webinars
  • An ad-free experience
  • A weekly newsletter
  • Bonus: A FREE 1-year Entrepreneur magazine subscription delivered directly to you
Make sure you’re covered for physical injuries or property damage at work by
  • Providing us with basic information about your business
  • Verifying details about your business with one of our specialists
  • Speaking with an agent who is specifically suited to insure your business

Latest on Entrepreneur