Amazon's revenue soars, profit tumbles, and investors are delighted
10/24/2013SAN FRANCISCO — Amazon’s third quarter followed a familiar script: It sold vast quantities of things, lost money while doing so, and investors were delighted.
Revenue was $17.09 billion, the company said today, up 24 percent, and about $400 million more than analysts predicted. But all that volume could not yield a profit. Amazon lost 9 cents a share, or $41 million, just as it had anticipated.
Investors broke out the champagne. In after-hours trading, the stock was up $29, or 8 percent, to $361. The stock is up nearly tenfold since 2008.
Amazon is the subject of an increasingly bitter debate about whether all of its investing in warehouses and new ventures will ever lead to solid profits. The bulls think the company is building an unassailable position as the most important U.S. retailer. The bears point to things like this week’s increase in the free shipping minimum to $35 from $25 as signs that Amazon must one day focus on the bottom line.
For the moment, the bulls are very much in ascendance.
Amazon had predicted that revenue in the third quarter would rise between 12 and 24 percent. The results came in at the very top of that range. As for the loss, it was smaller than the 60 cents a share, or $274 million, the company lost last year. Much of the poor 2012 showing was related to an ill-fated investment in LivingSocial, a daily deals site.
In a conference call with analysts, Tom Szkutak, Amazon’s chief financial officer, focused on what he called “a nice steady acceleration of growth” in North America since last year’s fourth quarter.
The results will nevertheless raise expectations for the fourth quarter.
“Amazon is the teacher’s pet of Wall Street,” said Sucharita Mulpuru, an analyst with Forrester Research. “There is no other company in the entire world that has the consistently abominable rate of profitability they do and yet has the stratospheric valuation they do.”
Amazon has about 100 fulfillment centers — what in the old economy were called warehouses. It has streamlined the process of opening these centers, but it is still a huge expense.
In the past 90 days, the company said, it began using 8 million square feet of new warehouses.
There is more to come. Amazon said this week that it would open new fulfillment centers in Hillsborough County and Lakeland, Fla., and in Baltimore.