What's going on?
Amazon was reluctant to shout its second-quarter update from the treetops on Thursday: its revenue outgrew investors’ expectations but its profit didn’t – and its stock fell 2%.
What does this mean?
Amazon’s total revenue was 20% higher than a year ago, but its highly profitable cloud computing branch grew more slowly than forecast. That, along with increased spending on faster and more flexible delivery options, may be responsible for the company missing overall profit predictions. Amazon’s investors will hope the $10 billion US government defense contract it’s shortly expected to win will reinvigorate the growth of its cloud business (tweet this).
In an echo of its last four quarterly reports, meanwhile, Amazon’s profit forecast for this quarter was below what investors had anticipated. You’d think they’d be used to its lowball predictions by now…
Why should I care?
For markets: Amazon could be deforested.
Amazon is at risk of being cut down to size by the US government – which is investigating the dominance of big tech firms – and by European competition regulators that want to know if it’s unfairly using data from third-party sellers on its platform. More than half of Amazon’s products come from external retailers, and their data may help it identify which items bag the most profit – and then start selling them itself. If it’s found to have broken any rules, Amazon’s cash might be extra firewood on the pile tech companies have provided so far.
The bigger picture: Amazon’s home run.
Amazon has changed the landscape of books, shopping, films, and staying healthy – and now it’s doing the same in real estate, this week announcing a partnership with real estate firm Realogy. Amazon will connect potential homebuyers with property sellers – and, once they’ve moved, sell them whatever they might need, be it an Alexa assistant or a digital doorbell. And when Amazon falls into a new market, it certainly makes a sound – whether investors are looking or not.