Amazon shares fall after lower than expected profits

With reports coming in almost daily about Amazon’s investments around the world, it isn’t surprising therefore that its profits are lower than projected at the beginning of this quarter. Q4 revenues were US $35.7 billion and profits were $332 million, while over the year its total revenue was $107bn and a profit of $596 million. The Q4 revenues were up 22% on Q4 of 2014 and the annual increase was 20%.

Many commentators have referred to Amazon as ‘free spending’ as the company seems bent on continued growth. While Prime membership grew by 50% worldwide, the company has been spending money like it is going out of fashion on amongst other things, a new fleet of trucks for deliveries across the US, experimenting with a new in-house air cargo service within the US and Europe, and a large number of new distribution centres and warehousing around the world. In the UK it is rumoured that Amazon may spend over £1 billion on buying out the online grocery chain Ocado, that would give it real weight in the UK e-commerce market and fostering the idea that there could be a major e-commerce price war in the UK before the end of 2016.

Amazon shares in the US fell 12% due to the lower than expected revenues. It seems that shareholders in the company should hold on tight before the company maximises profits – that may be quite some time as the online giant seems to wish to take on the world.

Founder Jeff Bezos remained upbeat despite the drubbing in the share dealing rooms: “Twenty years ago, I was driving the packages to the post office myself and hoping we might one day afford a forklift. This year, we pass $100bn in annual sales and serve 300 million customers. And still, measured by the dynamism we see everywhere in the marketplace and by the ever-expanding opportunities we see to invent on behalf of customers, it feels every bit like day one.”

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