Amazon posts another record profit, but revenue disappoints

NEW YORK -- Amazon reported another record quarterly profit Thursday, fueled by the growth of online shopping and its cloud-computing service.

But its revenue grew less than Wall Street analysts expected, and Amazon's shares fell after the results were released.

The company, based in Seattle, has boosted its profitability as it expanded far beyond online shopping. For years, the company posted razor-thin quarterly profits, spending most of what it earned on building warehouses and making other investments. But that's changed as its Amazon Web Services unit, which provides cloud computing services to companies and government agencies, has become a major money maker for Amazon.

Amazon posted third-quarter profit of US$2.88 billion, its fourth straight quarter of profits above US$1 billion. A year ago, it reported profit of just US$256 million. On a per-share basis, it reported earnings of US$5.75, beating the US$3.29 per share analyst expected, according to Zacks Investment Research.

Revenue rose 29 per cent to US$56.58 billion, but that was below the US$57.05 billion analysts expected. Shares of Amazon.com Inc., which are up 50 per cent so far this year, fell 7 per cent to US$1,655.98 in extended trading Thursday.

At Amazon Web Services, revenue jumped 46 per cent to US$6.7 billion. In its "other" category, which is mostly made up of its growing advertising business, revenue more than doubled to US$2.5 billion.

Amazon is expected to face higher costs as it boosts pay for all its U.S. workers to at least $15 an hour starting Nov. 1. The company hasn't said how much the wage hikes will cost it, and Amazon's Chief Financial Officer Brian Olsavsky declined to give a specific number when asked during conference calls with reporters and analysts on Thursday. About 400,000 workers at Amazon's warehouses, as well as those at its Whole Foods grocery chain, will receive pay increases.

Looking ahead, Olsavsky said the company is "expecting a strong holiday season." However, its revenue forecast of US$66.5 billion to US$72.5 billion for the fourth quarter, which includes the holiday shopping season, was below the US$73.87 billion that analysts expected.

Rivals are hoping to steal some sales from Amazon's by mimicking its fast delivery.

Target, for the first time, will be offering free two-day shipping with no minimum purchase this holiday season. But Amazon has already cemented loyalty with its Prime membership, in which members pay US$119 a year or US$12.99 a month for fast delivery, access to Amazon's movie streaming service and other perks.

Olsavsky said Thursday that Amazon still has more than 100 million Prime members worldwide, even after raising its membership fees by 20 per cent earlier this year.

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