Amazon sees pandemic boosting holiday sales and investment in delivery

Thursday reported record sales and profits for the quarter ended in September

Thursday reported record sales and profits for the quarter ended in September

Amazon forecast operating profit for the current quarter to be between $1.0 billion and $4.5 billion, short of $5.8 billion analysts expected, according to research firm FactSet. Amazon's third-quarter shipping costs totaled more than $15 billion, a 57% year-over-year increase.

Looking ahead, Amazon is bullish on sales, but notes costs related to COVID-19 might affect operating income.

In the just-ended third quarter, AWS sales grew 29%, while Microsoft reported a 48% rise in revenue for its Azure cloud.

Andrew Lipsman, a principal analyst at EMarketer, said he suspects Amazon is being conservative with its guidance, even the upbeat sales forecast.

Amazon CFO Brian Olsavsky told investors Thursday the e-commerce giant sees many customers adopting the industry-leading AWS cloud at a faster pace due to the COVID-19 crisis while others in hard-hit industries retract their spend.

"We feel good about the state of our business", Olsavsky said of AWS, "and the state of our sales force to drive value in this period". Amazon India also hosted Prime Day on 6-7 August, during which twice as many customers became members compared to the previous year.

Amazon said fourth-quarter operating income will range from US1 billion to US4.5 billion, compared with analysts' average estimate of US5.95 billion.

Amazon shares initially rose 2 percent in after-hours trading but then slumped 1 percent as the company forecast $4 billion in COVID-19 related costs for the fourth quarter

Investors traditionally focus on Amazon's costs, fearing that the company's spending will cut into its profit.

But revenue and earnings beats weren't enough to lift Amazon stock, which slightly fell in after-hours trading from a Thursday market close of $3,211.01 to $3,144 at the time of this publication.

Chief financial officer (CFO) Brian Olsavsky said the company will continue to invest in global markets, especially in India, as volumes grow. It is testing employees for the virus and getting protective gear for new hires.

That's still about half the 2.2 million workers that rival Walmart employs. Net income was US12.37 a share.

Analysts widely expect the holiday shopping rush to test the capacity of the US logistics system to accomodate a surge in home delivery. "It does behoove shoppers to shop early".

"The largest portion of (P&L) costs relate to continue productivity headwinds in our facilities including process revisions to allow for social distancing and incremental cost to ramp up new facilities We expect to grow our fulfillment and logistics network square footage by approximately 50% this year which includes significant additions to our fulfillment centers as well as our transportation facilities", said Olsavsky. "We've invested a lot to be ready". But instead of acknowledging this fact, the company instead used its quarterly financial announcement to talk about all the hiring its done during this terrible time: Amazon says it has created over 400,000 jobs this year and that its employees are offered "industry-leading pay and great healthcare".

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