Spending Cuts Into Profit, Amazon Earnings Tumble by 77%, Shares Head Lower

Shares of Amazon.com Inc. plunged about 3 percent in immediate after-hours action on Thursday after the electronic commerce and cloud computing company reported much lower earnings than expected.

The e-commerce giant posted net income of $197 million, or 40 cents a share, on sales of $38 billion for the second quarter. Due to the fact that operating expenses rose across the board, earnings, which failed to reach analysts’ expectation for a rise to $1.41 a share on sales of $37.2 billion, suffered a decline of 77% from the same quarter a year ago.

According to the earnings report, fulfillment costs – the amount that Amazon spends to fulfill customers’ orders on its e-commerce platform – jumped about 33% from a year ago while spending on technology and content even soared stronger, by about 43%.

Amazon anticipates that spending will continue to rise rapidly in the current quarter. Third-quarter revenue, however, is forecast to be in a range of $39.25 billion to $41.75 billion, which is in line with what analysts expected for sales of $39.98 billion.

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