Amazon profits suffer largest percentage drop in four years

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Amazon’s profits declined by the largest percentage in more than four years as the online giant said it has spent heavily on coping with the pandemic and delivered a downbeat forecast for the holiday season.

Net income decreased to $3.2bn in the third quarter compared with $6.3bn in the third quarter of 2020, its largest year-over-year decline since 2017. The company’s revenues, $110.81bn for the quarter, were also below analysts’ expectations.

Investors had expected an earnings decline after Amazon issued a weak forecast three months ago due to global supply-chain and staffing issues. Andy Jassy, Amazon chief executive officer, said those problems would continue to weigh on the company.

“We’ve always said that when confronted with the choice between optimizing for short-term profits versus what’s best for customers over the long term, we will choose the latter – and you can see that during every phase of this pandemic,” said Jassy.

The Covid pandemic drove “extraordinary investments across our businesses to satisfy customer needs,” said Jassy, and expenses were likely to continue to rise.

“In the fourth quarter, we expect to incur several billion dollars of additional costs in our consumer business as we manage through labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs – all while doing whatever it takes to minimize the impact on customers and selling partners this holiday season,” he said.

“It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”

Amazon’s results come after strong performances from its technology peers this week. Google parent company Alphabet nearly doubled its profit in its third quarter as businesses poured money into online ads. Microsoft reported a 48% jump in quarterly profit to $20.5bn. Facebook’s profits topped $9bn even as it faced a barrage of negative publicity.

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