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Amazon stock plunges 14% after poor prediction for holiday quarter

After a pessimistic earnings report from Amazon released on Thursday, company shares have dropped 14%

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Boxes are moved to delivery trucks at Amazon’s delivery center in American Fork in 2021.

Boxes are moved to delivery trucks at Amazon’s new delivery center in American Fork on May 20, 2021.

Laura Seitz, Deseret News

Amazon shocked investors on Thursday after the company projected a drop in revenue for this holiday quarter, with shares dropping 14% in response during after-hours trading. The e-commerce powerhouse and other Big Tech companies are encountering the same issue — Americans are wary of spending freely with the looming threat of recession and investors are less willing to take risks as a result.

Bloomberg reported that Amazon’s profits this quarter will rise only 2%-8%, a record low for the company’s “peak” season. Amazon’s additional services — specifically its web, cloud-computing and advertising services — each predicted a similarly underwhelming growth in revenue. According to Forbes, Amazon Web Services grew 28% in the last quarter, falling short of its greater-than-30% sales trajectory.

“(Amazon Web Services) is the heart of the company, and the weakness there will raise a giant red flag,” analyst Adam Crisafulli of Vital Knowledge Media told Forbes.

2022 has been a rough year for Amazon. Fortune reported that in response to shoppers returning to in-store purchases and pre-pandemic shopping habits, Amazon has had to delay warehouse openings, shut down experimental projects and cut back on hiring new employees to compensate for the drop in sales. Despite attempts to cut costs, however, Bloomberg reported the company’s expenses have jumped 18% under CEO Andy Jassy, who succeeded Jeff Bezos in July of 2021.

“There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets,” Jassy said following the results’ release, CNN Business reported.

Despite Jassy’s words, Wall Street didn’t respond well to the revenue predictions. Amazon shares fell 14% following the results’ release, according to CNN Business.

With Amazon’s anticipated revenue to sit between $140 billion to $148 billion — and Black Friday less than a month away — many independent sellers are preparing for a difficult holiday quarter. Adobe Inc., for example, predicted U.S. e-commerce sales to rise only 2.5% from 2021, according to Bloomberg.

“The core e-commerce business has come under pressure from changing shopping habits from the boom seen over the pandemic and a consumer with less disposable income,” said Matt Britzman, an analyst at Hargreaves Lansdown.

Amazon shares have fluctuated since the release, down 10% as of Friday afternoon. Amazon Chief Financial Officer Brian Olsavsky is still “optimistic about the holiday,” according to Bloomberg.

“We’re taking actions to tighten our belt,” Olsavsky said in a press call following the Thursday investor meeting, stating that the company would cut back on hiring, products and services in less profitable areas to further counter the decline in sales growth.