Amazon CEO Jeff Bezos Promises Wall Street a Profit
Amazon.com Inc. CEO Jeff Bezos did something Thursday that he hasn’t since 2010: he assured investors that his company would make a profit in its busy holiday shopping season.
Amazon has a history of wide-ranging forecasts—$1 billion wide—on earnings that straddle the line between making money and losing cash. The e-commerce giant sells goods online, builds tablets for reading e-books, makes original movies, delivers food from restaurants and operates data centers used by Netflix Inc. and Pinterest Inc.
Investors cheer the Bezos who tramples brick-and-mortar retailers by changing the way people shop. They tend to punish the Bezos who risks their money on things like a smartphone to challenge Apple Inc.’s iPhone.
Bezos made a commitment Thursday to make them richer, with the company forecasting fourth-quarter operating income from $80 million to $1.28 billion. It's still a broad range, but the low- and high-ends are on the right side of zero. And investors made Bezos richer by sending Amazon shares up as much as 13 percent in extended trading after the earnings were released.
"The whole narrative about this company not being able to turn a profit is slowly starting to fade away," said RJ Hottovy, analyst at Morningstar Inc. "All of the components are working together now."
Amazon had a lot of upside. Its first Prime Day sales promotion in July boosted its global revenue growth rate by 2 percent, Chief Financial Officer Brian Olsavsky said. Its cloud computing division, Amazon Web Services, beat expectations with sales gaining 78 percent. And importantly, revenue rose faster than expenses.
Beyond the numbers, there are signs that Amazon’s profitability in the U.S. will soon be mimicked overseas as it exports the same services that have wooed customers in America. And the company emphasized innovation in an earnings call with investors.
Amazon Web Services has introduced 530 new features so far this year, more than all of last year, Olsavsky said. And the company had 30,000 robots in its warehouses at the end of the quarter, double the number from a year earlier, he said, to emphasize that Amazon isn’t letting up on innovation even though it’s watching spending.
"Innovation and investment will continue and could be lumpy at times," he said. "The cost reductions will be a constant presence."
While Bezos promised profits, he also pointed toward new devices, citing the low-cost Fire tablet.
"This is one more step in our mission to bring customers premium products at non-premium prices," Bezos said.