Amazon Crashes After Missing Revenues, Guiding Far Below Consensus

With the bulk of the FAAM(N)G stocks reporting somewhat mixed earnings so far, with NFLX, FB, and AAPL disappointing offset by solid results from Google and Microsoft, investors were keenly looking for a tiebreaker from today’s Amazon earnings, where the biggest question for Amazon is how sustainable are the growth trends that boosted its performance during the pandemic. The Internet giant was one of the biggest beneficiaries of shifts in consumer and business behavior last year while continuing to grab market share in cloud.

Many consumers flocked to buy things online as they wanted to avoid infection at physical stores. Further, Amazon Web Services revenue soared on back of rising usage from Internet digital services – including remote-working software, videostreaming and gaming. But with the wider available of vaccines and as employees start to return to physical offices, the risk is some of these trends may start to reverse. Bloomberg also notes that investors will be also looking for any commentary on the future prospects for regulation and antitrust legislation.

Questions aside, Amazon shares – which spent much of 2021 in a tight range – rallied in recent weeks, rising from $3500 to just over $3700 before giving up half the gains in the past few days. The stock has been approaching an intraday record of $3,773.08 that was set in early July, although so far it has been unable to surmount it.

Is this the quarter that finally propels Amazon stock to new all time highs?

Looking ahead, Amazon – in its first quarter under new CEO Andy Jassy who may or may not join the analyst call later today, as a reminder Jeff Bezos hadn’t joined an earnings call since 2009 –  is expected to post revenue of $115 billion, up 29% from a year earlier, with EPS of $12.28, up 19%. Both would be records for the second quarter.  Looking at Amazon’s cash machine, analysts expect AWS to pull in $14.1 billion in the second quarter, up 31% from a year earlier. The unit’s growth has slowed in recent years, and lags that of smaller cloud-computing rivals Microsoft and Google.

As Bloomberg notes, a forward-looking question for today: How is Amazon’s profitability going to shake out after the company added millions of customers, hundreds of warehouses, and hundreds of thousands of employees in the past year?

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So with that in mind, how did Amazon do? Well… not so good: not only did the company miss on the top line and operating income, but guided much lower than Wall Street expected

• Net Sales $113.1B, missing estimates of $115.1B
• EPS $15.12, beating estimates of $12.28
• Operating Income $7.7BN, missing est. $7.82B
• AWS net sales $14.81 billion, beating estimate $14.18 billion
• Free cash flow increased to $16.8 billion for the trailing twelve months, compared with $11.7 billion for the trailing twelve months ended March 31, 2020.

Looking ahead, the company’s guidance was unexpecteldy ugly, with the high end of expectations missing sellside consensus

• Q3 Net Sales $106.0B to $112.0B, badly missing Wall Street est. $118.75B
• Q3 Operating income between $2.5 billion and $6.0 billion, also missing estimates of $8.11BN

The stock, predictably is crashing after hours, down almost $200 to $3,418.