Amazon scares investors with $126m second quarter loss

Jul 25, 2014

Online retailer also warns that its sales increases will be disappointing in next few months

David McNew/Getty Images

Amazon has announced losses of $126m for the second quarter of this year, almost twice what was expected, and the online retail giant has warned that it is likely to see significantly less growth in sales than usual over the next three months.

Amazon's shareholders are used to it making only marginal profits - but have been forgiving because the ambitious firm is constantly improving its sales, earning more and more revenue, says the BBC. The profits stay low because of the high cost of expanding the business into new areas.

But the announcement that the firm lost $126m (£74m) between April and June has scared investors - and the company's US share price fell by six per cent in after-hours trading.

Reassuringly for shareholders, sales were up 23 per cent in the second quarter, exactly in line with expectations. But the company also warned investors it expects only a 15 per cent increase over the next three months - and that news helped prompt the share slump.

Losses were particularly severe between April and June because of heavy investment in new products and services, including the launch last month of Amazon's first smartphone, the Fire Phone.

Other expensive endeavours - which may pay off in the future - included the development its own digital content including computer games and TV shows, improving Sunday deliveries in the US and building up its web services business.

Amazon has hired "thousands" of new staff in recent weeks to man the web services operation. The venture offers computer services and storage for businesses, and has been expanding rapidly.

Meanwhile, another web titan, Facebook, announced vastly increased revenue for quarter two of 2014 - up 61 per cent year on year to $2.91bn (£1.71bn), says Newsday. Profits were $788m (£464m).

Sign up for our daily newsletter