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Amazon 3Q Profit Soars, but Misses Estimates by $540 Million

Amazon 3Q Profit Soars, but Misses Estimates by $540 Million

SEATTLE — Amazon.com, Inc. (AMZN) today announced financial results for its third quarter ended September 30, 2018.

Operating cash flow increased 57% to $26.6 billion for the trailing twelve months, compared with $17.0 billion for the trailing twelve months ended September 30, 2017. Free cash flow increased to $15.4 billion for the trailing twelve months, compared with $8.0 billion for the trailing twelve months ended September 30, 2017. Free cash flow less lease principal repayments increased to $8.1 billion for the trailing twelve months, compared with $3.5 billion for the trailing twelve months ended September 30, 2017. Free cash flow less finance lease principal repayments and assets acquired under capital leases increased to an inflow of $5.4 billion for the trailing twelve months, compared with an outflow of $1.1 billion for the trailing twelve months ended September 30, 2017.

Common shares outstanding plus shares underlying stock-based awards totaled 507 million on September 30, 2018, compared with 503 million one year ago.

Net sales increased 29% to $56.6 billion in the third quarter, compared with $43.7 billion in third quarter 2017. Excluding the $260 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 30% compared with third quarter 2017.

Operating income increased to $3.7 billion in the third quarter, compared with operating income of $347 million in third quarter 2017.

Net income increased to $2.9 billion in the third quarter, or $5.75 per diluted share, compared with net income of $256 million, or $0.52 per diluted share, in third quarter 2017.

“Amazon Business has now reached a $10 billion annual sales run rate and is serving millions of private and public-sector organizations in eight countries,” said Jeff Bezos, Amazon founder and CEO. “And we’re not slowing down – Amazon Business is adding customers rapidly, including large educational institutions, local governments, and more than half of the Fortune 100. These organizations are choosing Amazon Business because it increases transparency into business spending and streamlines purchasing, with increased control. The team is doing a fantastic job building and innovating for customers.”

Highlights:

  • Amazon continues to enable flexibility in Prime membership options internationally, launching monthly Prime membership in Canada and Mexico, quarterly Prime membership in China, and monthly Prime Student membership in Germany.
  • Amazon expanded grocery delivery from Whole Foods Market through Prime Now. The service is currently available in more than 60 U.S. cities, offering customers delivery in as fast as an hour on thousands of natural and organic groceries and locally-sourced items.
  • Amazon launched grocery pickup from Whole Foods Market through Prime Now, allowing customers to place their order via the Prime Now app and pick up their groceries in as little as 30 minutes. The service is available in more than 10 U.S. cities with plans for continued expansion.
  • Amazon Go, a new kind of physical store with no checkout required, recently opened five new stores in Seattle, Chicago, and San Francisco. Amazon Go’s checkout-free experience is enabled by our Just Walk Out Technology, a combination of computer vision, sensor fusion, and deep learning.
  • Amazon launched Amazon 4-star in New York City, a physical store that carries a highly-curated selection of products from the top categories across Amazon.com including devices, consumer electronics, toys, games, books, kitchen, home, and more. Products in the store are rated 4 stars and above, are a top seller, or are new and trending on Amazon.com.
  • Amazon introduced Amazon Storefronts in the U.S., Germany, and the U.K. Combined, these new stores allow customers to shop online for over one million products exclusively from small and medium-sized businesses selling on Amazon.
  • Amazon launched Amazon.com.tr in Turkey, offering customers millions of products across 15 categories from over 1,000 local sellers, along with low prices and free delivery for orders above 50 Turkish Lira.
  • Amazon India announced the launch of Amazon.in in Hindi. Customers can now read detailed product information, find deals and discounts, place the orders, pay for their orders, manage their account information, track their orders and view order history conveniently in Hindi.
  • Amazon Business is generating $10 billion in annualized sales, serving hundreds of thousands of business sellers and millions of customers across eight countries. Amazon Business launched new Business Prime benefits in the U.S., Germany, and Japan including Spend Visibility and Guided Buying features.
  • Amazon and American Express launched the Amazon Business American Express Card offering flexible benefits that allow small businesses to choose rewards or payment terms purchase by purchase without an annual credit card fee. Benefits vary based on customers’ Prime membership; eligible Prime and Business Prime members can choose between 5% back and 90-day payment terms on U.S. purchases at Amazon Business, Amazon Web Services, Amazon.com, and Whole Foods Market.
  • Amazon announced it is increasing its hourly minimum wage to $15 in the U.S., £10.50 in the London area, and £9.50 in the rest of the U.K. The increase is for all full-time, part-time, temporary (including those hired by agencies), and seasonal employees in these locations, effective November 1. The new minimum wages will benefit more than 250,000 Amazon employees in the U.S. and 17,000 Amazon employees in the U.K. In addition, it will benefit over 100,000 seasonal employees in the U.S. and over 20,000 in the U.K. who will be hired at Amazon sites across the country this holiday. All of Amazon’s U.S. and U.K. hourly operations and customer service employees will see an increase, including those whose base wage is already at the higher minimum wage.
  • In response to Hurricanes Florence and Michael in the U.S., the Disaster Relief by Amazon team deployed more than 30 trucks with more than 600,000 Amazon-donated disaster relief items, including: bottles of water, food, supplies for children, and other essentials. In addition, thousands of Amazon customers donated items and money to the American Red Cross, Feeding America, and Save the Children through their Wish Lists, Amazon Pay, and for the first time, via Alexa.

Fourth Quarter 2018 Guidance

Net sales are expected to be between $66.5 billion and $72.5 billion, or to grow between 10% and 20% compared with fourth quarter 2017. This guidance anticipates an unfavorable impact of approximately 80 basis points from foreign exchange rates.

Operating income is expected to be between $2.1 billion and $3.6 billion, compared with $2.1 billion in fourth quarter 2017.

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