Amazon shares declined by more than 4% in extended trading on Thursday. The slump came the firm reported weaker-than-anticipated results for the third quarter and delivered disappointing guidance for the critical holiday period.
The firm is reckoning with a decelerating sales surge as customers return to physical stores and Amazon faces supply chain challenges. Revenue in the Q3 of 2021 increased 15%, down from 37% growth in the same period a year ago.
For Q4, Amazon expects sales between $130 billion and $140 billion, showing growth between 4% and 12%. Analysts were anticipating revenue to surge 13.2% year-over-year to $142.1 billion.
Amazon CEO Andy Jassy announced the firm anticipates taking on several billion dollars of extra costs in its consumer business in the fourth quarter due to labor shortages, higher employee costs, global supply chain constraints, and boosted freight and shipping costs. According to the CEO, Amazon is navigating these challenges amid the peak holiday season.
Amazon is trying to shore up its supply chain amid the global challenges. It added new shipping ports and boosted its fleet of planes and trucks.
It Is First Time Revenue from Amazon Services Exceeded Its Retail Sales
The company announced earlier that it plans to hire 275,000 permanent and seasonal employees nationwide, in part to help deal with the holiday shopping rush. Earlier, CFO Brian Olsavsky reported that Amazon faced steep labor costs as it looks to hire and retain employees.
Sales in online stores increased 3% from 2020 to $49.9 billion, whereas physical store revenue rose 13% to $4.27 billion.
Moreover, revenue from third-party seller services, including commissions on the marketplace and fulfillment and shipping fees, soared 18% to $24.25 billion.
For the first time, revenue from Amazon services exceeded its retail sales. Net product sales came in $54.9 billion in Q3. Meanwhile, revenue from Amazon Web Services increased by around $55.9 billion.