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Amazon’s Spending on Fast Deliveries Hits Its Bottom Line

Amazon's Spending on Fast Deliveries Hits Its Bottom Line

Photo Credit: Philippe LOPEZ / AFP

HIGHLIGHTS
  • Net income slid 27 percent from last year to $2.1 billion
  • Revenue climbed 24 percent to $70 billion in the quarter to September 30
  • Amazon shares were down nearly seven percent in after-market trades

Amazon on Thursday reported quarterly profits shy of Wall Street forecasts as it poured money into speeding up delivery time to just a day. Net income slid 27 percent from last year to $2.1 billion (roughly Rs. 14,900 crores), with profits pressured by Amazon’s spending on fast deliveries and its lucrative AWS cloud services offerings. Revenue climbed 24 percent to $70 billion (roughly Rs. 4,96,000 crores) in the quarter to September 30, compared to the $56.6 billion (roughly Rs. 4,01,000 crores) in sales logged in the same period a year earlier, according to the Seattle-based company.

Amazon shares were down nearly seven percent in after-market trades that followed release of the earnings figures.

Cost of sales at Amazon leapt about 33 percent, eating into net income, according to the earnings report.

Amazon has been pushing to deliver packages more quickly, promising a wide selection of items to arrive within a day of being ordered by members of its Prime subscription service.

“We are ramping up to make our 25th holiday season the best ever for Prime customers — with millions of products available for free one-day delivery,” said Amazon chief executive Jeff Bezos in the earnings release.

“Customers love the transition of Prime from two days to one day — they’ve already ordered billions of items with free one-day delivery this year. It’s a big investment, and it’s the right long-term decision for customers.”

Amazon added nearly 100,000 workers in the quarter, most of them to bolster fulfillment centers and delivery teams, according to chief financial officer Brian Olsavsky.

“We are really pleased with customer reaction to one-day delivery,” Olsavsky said.

“We have seen Prime members spend more, so they must see it as a real help to them in their daily lives.”