Coverage: Amazon earnings miss the mark

Amazon Inc. is a tough company to figure out sometimes. They report incredible revenue numbers, but profit can be tough to come by. Here’s the media coverage of what can be a confusing quarterly report.

Joshua Brustein had this story for Bloomberg Businessweek:

Amazon (AMZN) puts out two sets of numbers in its quarterly financial reports that consistently generate awe and indignation. The first: a soaring revenue number. The second: a tiny profit or—more often in recent years—a loss.

The past quarter was no different. Amazon showed nice sales growth in Thursday’s earnings report, bringing in $19.34 billion—23 percent more than it did a year ago, and slightly better than analyst’s expectations. It’s also a bit better than Google,(GOOG) which grew 22 percent last quarter, and way better than EBay’s (EBAY) 13 percent revenue growth. Yet Amazon also reported a net loss of $126 million, the company’s biggest loss since 2012. This makes sense when you remember that Jeff Bezos is pouring money into everything from same-day grocery delivery to video-game development to Amazon’s own disastrously reviewed smartphones. The profits from the retail business are erased by investments in the company’s newer dalliances.

As is often the case on earnings day, the dual numbers stirred concern among investors. Amazon’s stock price dropped more than 11 percent in the immediate aftermath of the release of the earnings report.

Time’s Jack Linshi detailed the numbers as well as investors’ tolerance for the company’s recent performance:

Amazon reported losing 27 cents per share on revenue of $19.34 billion, while Wall Street had been expecting, on average, a loss of 15 cents per share. Additionally, Amazon’s net loss was $126 million, far greater than the $7 million posted during the same period in 2013.

The company’s net sales, however, rose 23% to $19.34 billion, compared with $15.70 billion in second quarter 2013. Amazon said it expects net sales in the third quarter to reach between $19.7 billion and $21.5 billion. It also expects an operating loss of $410 million to $810 million for next quarter, up significantly from $25 million in 2013, which Amazon attributes to stock-based compensation and amortization of intangible assets.

Investors have long been forgiving of Amazon posting losses or thin profit margins despite its rising revenue, which some insist will be channeled into developing new products that will eventually win back those losses. But Amazon’s shares have fallen by nearly 10 percent this year as some investors grow skeptical of Amazon’s potential long-term growth. Questions remain about how well Amazon’s new services, such as its same-day grocery delivery service, will perform in the future, as Amazon will likely have to work harder to convince stakeholders of its profitability.

Amazon CEO Jeff Bezos said in a statement Thursday that the company continues “working hard on making the Amazon customer experience better and better,” noting recent improvements such as those to its cloud computing service, and its new Fire Phone, which goes on sale in the U.S. Friday.

Greg Bensinger wrote for The Wall Street Journal that Amazon’s many projects may leave investors disappointed:

Since January, the Seattle retailer has launched a set-top box for home video streaming, a wand for shopping for groceries at home, a document-sharing service for businesses, a music-streaming offering, and an unlimited e-book subscription. Then there’s first Amazon-branded smartphone, due out on Friday.

With that in mind, investors will be looking for any details about how all these services are performing and how they fit together into Amazon’s long-term strategy. Investors are likely to be disappointed. Amazon holds close to the vest details of its business beyond its balance sheet – seven years after launching the Kindle e-readers, Amazon has yet to disclose even those sales.

Still, profit — or the lack of one — remains a closely watched metric along with overall sales. Amazon is unique in that investors generally don’t punish the company for turning in thin margins in the face of rising revenue.

Deepa Seetharaman’s story for Reuters pointed out that the company is expecting to continue to lose money as it builds out new businesses:

The company also forecast an operating loss of between $810 million and $410 million for the third quarter ending in September, a sharp increase from a loss of $25 million a year earlier.

Amazon is investing heavily in new businesses and hardware products, as it prepares to take on major tech rivals from Apple Inc and Google Inc to Netflix.

Chief Financial Officer Tom Szkutak said Amazon had a “tremendous amount of opportunities” and its investments were “certainly impacting short-term results.”

The company is spending more than $100 million on original video content in the third quarter, a substantial increase compared to last year and the second quarter, Szkutak said.

“We’re going to continue to invest on behalf of customers with the understanding that long-term has to come,” he said during a call with reporters. “We’ll obviously be looking to get great returns on investor capital and high amounts of cash flow.

New products and businesses unveiled this year include a subscription book service, new digital content for its Prime online video service, a TV streaming-box and the upcoming “Fire” smartphone. Amazon is also spending billions of dollars expanding its network of fulfillment centers across the world.

What’s incredible is the fact that Amazon isn’t making money. It has everything and is often the go-to retailer for nearly any product for so many people. It’s no wonder that investors are getting a bit impatient with the company. It has rolled out a lot of new products, but when is it going to start making money?