Amazon reported revenue of US$72.4 billion for the quarter, slightly beating analyst estimates.
Amazon’s guidance for Q1 left investors generally unenthused and shares were down 1.7% at close of trading.
The company is expecting to generate first-quarter net sales between US$56-$60 billion, down on previous analyst estimates, which averaged US$60.83 billion.
— CNN (@CNN) January 31, 2019
Amazon recorded record profits last quarter but is facing slowing growth
For the third consecutive quarter, Amazon set a new record for profit, with US$3 billion in net income, a 66% increase on last year.
For years, Amazon pursued a strategy of operating on thin margins and plowing profits back into the company but its profitability has soared in recent times as new revenue streams including advertising, Amazon Web Services (its cloud computing services) and its third-party marketplace have opened up.
Amazon CEO Jeff Bezos was jubilant at the inroads made by Alexa, its virtual assistant. “Alexa was very busy during her holiday season,” he said. “Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year.”
Amazon Prime was another successful component of the business. Tens of millions of shoppers signed up, boosting the company’s revenue from subscriptions by 25% to US$4 billion. Amazon Prime now has more than 100 million members internationally.
The retail monolith traditionally generates its largest earnings in the fourth-quarter, which includes the crucial holiday shopping season. It reported earnings for the previous quarter at US$6.04, outstripping estimates of US$5.68 per share.
It faced slowing growth in terms of sales; North American sales were up 18% year-on-year after showing 42% growth last year. International sales were also down to 15% growth, compared with 29% the previous year.
— Reuters Top News (@Reuters) January 31, 2019
The Indian government has introduced new laws to help local retailers compete with Amazon
The company is facing an increased regulatory burden in India and had to remove items en masse from its India website due to rules being introduced on 1 February which prohibit companies from selling items through vendors in which they hold an equity interest. There is also a new ban on e-commerce platforms having more than a quarter of their inventory come from a single vendor and updated restrictions on deep discounting.
Amazon Chief Financial Officer Brian Olsavsky admitted the situation in India is “a bit fluid right now” but was optimistic about the company’s long-term prospects there. Amazon has more than 400,000 sellers on it Amazon India Marketplace.
The US government has even sought to intervene in the situation, with officials reportedly telling Indian counterparts the new regulations would hamper Amazon’s plans to invest in the country.
The new laws on India’s e-commerce industry were hastily introduced on 26 December 2018 and analysts believe they have the potential to massively impact on Amazon’s earnings in the country. CRISIL Ratings projected the company could lose up to 40% in revenue in India because of the changes.
Despite its new international challenges, Amazon remained the largest company in the world by market cap at a time of writing at US$840 billion.