Amazon Leaves $1 Trillion Club

The e-commerce giant falls after delivering disappointing forecasts for the last months of the year.

It’s a real bloodbath. 

Amazon was not spared by Wall Street after the publication of its third-quarter results on Oct. 27. 

The company, which is one of the barometers of growth because it serves consumers as well as businesses and governments, was closely watched by investors worried about the state of health of the economy.

And the least we can say is that the juggernaut of online commerce and the cloud has confirmed the worst fears: the economy is doing badly. Indeed, the company indicated that demand had become soft in Europe, impacted by the energy crisis resulting from the Russia-Ukraine war. In the US, consumers are also starting to apply the brake on spending after a strong start to the fourth quarter.

Inflation, which is at its highest in 40 years, continues to wreak havoc on consumption.

Disappointing Forecasts

The company, founded by tech billionaire Jeff Bezos, said it expects fourth-quarter revenue between $140 billion and $148 billion, representing year-over-year growth of 2% to 8%, in a press release. This is significantly below analysts’ expectations of $155 billion. This is significantly below analysts’ expectations of $155.15 billion.

This forecast has particularly cooled investors because it relates to the period of the holiday season. During the holidays, consumers tend to spend more than at other times of the year. The caution displayed by Amazon therefore suggests that things are going badly.

Third-quarter revenues increased by 15% to $127.1 billion, but this too is in below analysts’ expectations of $127.46 billion.

Amazon Web Services (AWS), the engine of the company’s growth, posted $20.5 billion in revenues, up 28% year-over-year. This is the first time in more than six quarters that AWS growth has fallen below 30%.

A $263 Billion Drop

It was therefore no surprise that Wall Street reacted badly, dumping Amazon shares. Share prices fell 14.2% to $95.21 after hours, less than two hours after the publication of the results. This translated into a loss of market value of more than $160 billion. 

In the minutes following the publication, share prices even fell by more than 20% to $88.23, which translated into a drop in market value of $263 billion.

What’s certain is that Amazon is no longer in the $1 trillion-plus business club. Its market capitalization was around $970 billion at last check. It is possible that the company will return to the $1 trillion club during the October 28 trading session.

At present, this select club consists of only four members: Apple  (AAPL) – Get Apple Inc. Report, oil giant Saudi Aramco, Microsoft  (MSFT) – Get Microsoft Corporation Report and Alphabet  (GOOGL) – Get Alphabet Inc. Report.

“There is obviously a lot happening in the macroeconomic environment,” said Andy Jassy, Amazon CEO, in the press release. “We’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets.”

Amazon earnings cap a disastrous earnings season for Big Tech. Microsoft, Alphabet and Meta Platforms  (META) – Get Meta Platforms Inc. Report were all disappointing, while Apple warned it was still affected by supply chain disruptions.

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