Amazon reports $126m quarterly loss
- 24 July 2014
- From the section Business
Amazon has reported a loss of $126m (£74m) in the second quarter and warned that sales could slow in the current quarter.
Amazon forecast third quarter sales of between $19.7bn and $21.5bn, which could mean sales growth of as little as 15% - well down on previous quarters.
Amazon has traditionally survived on thin profit margins, but investors have been reassured by strong sales growth.
But today's warning over sales has spooked investors.
In after hours trading in the US shares slumped by 6%.
Amazon has been investing heavily to build up its business, including the launch last month of its first smartphone - the Fire Phone.
It has been developing digital content including computer games and TV shows.
In its conference call the company said that producing its own TV shows would cost $100m in the third quarter.
Amazon has also been spending money on improving its delivery systems which includes expanding Sunday delivery to 18 cities in the United States.
Another major cost of Amazon has been the building of its Amazon Web Services business.
It provides computer services and storage for businesses and has been growing very quickly.
To match that growth Amazon has been investing heavily in infrastructure and has hired "thousands" of staff for the web services operation.
All that has contributed to a negative net income of $126m in the second quarter, which compares with a loss of $7m in the same quarter in 2013.
That loss came despite a 23% jump in second quarter sales to $19.3bn.
Leo Kelion, BBC Technology Desk Editor
Amazon's enjoyed strong growth in its sales over the past quarter - its 23% revenue rise on last year's figure was bang on target for Wall Street's predictions.
But what makes investors nervous is that its net loss was nearly double what had been forecast.
What's more, it has warned that it might sink further into the red during the current period.
In short, Amazon's growing list of investments is hurting its bottom line - at least in the short term.
Developing new products such as its Fire Phone, Fire TV set-top box and Dash grocery scanner haven't come cheap.
The company also pointed to the need to invest in the expansion of its web services division - the behind-the-scenes computing power it rents out to clients including Netflix, Nasa and the CIA, as well as smaller app creators.
On top of that the firm has rolled out Sunday deliveries in the UK and US, commissioned new TV shows for its Prime subscribers and expanded its operations in India and China.
Benefit of the doubt
In the past, shareholders have been willing to give Amazon the benefit of the doubt - foregoing dividends today for the promise of it being in an even stronger position to pay out in the future.
But they may be concerned about how many bets it is taking at once - this week's lacklustre reviews for the Fire Phone can't have helped.
The size of today's sell-off indicates that some at least want more reassurance - particularly since Amazon refuses to break down its numbers to reveal exactly how its different products are performing.