Amazon.com Inc. reported its first quarterly profit decline in more than two years, amid higher spending to speed package delivery.
The company also forecast revenue and profit for the holiday quarter below expectations, as it faces fierce competition and rising costs from its plan to speed up delivery times globally.
Revenue growth for the company’s cloud computing business also slowed down in the third quarter. However, Amazon beat expectations on overall third-quarter revenue, posting sales up 24% to $70 billion.
The news underscores the costly investment Amazon is making to cut delivery times to one day for its Prime loyalty members, as the company is trying to beat rivals such as Walmart that have marketed two-day shipping without subscription fees.
Fast delivery on countless goods has helped the world’s largest online retailer attract more than 100 million paid subscribers to Prime, who keep returning to take advantage of their membership and other perks like music and television streaming.
Shipping costs are rising faster than before, up 46% to $9.6 billion in the third quarter, Amazon reported. The company’s net income fell to $2.13 billion from $2.88 billion a year earlier.
“We are ramping up to make our 25th holiday season the best ever for Prime customers — with millions of products available for free one-day delivery,” said Jeff Bezos, Amazon founder and CEO. “Customers love the transition of Prime from two days to one day — they’ve already ordered billions of items with free one-day delivery this year. It’s a big investment, and it’s the right long-term decision for customers. And although it’s counterintuitive, the fastest delivery speeds generate the least carbon emissions because these products ship from fulfillment centers very close to the customer — it simply becomes impractical to use air or long ground routes. Huge thanks to all the teams helping deliver for customers this holiday.”
Amazon forecast fourth-quarter net sales in the range of $80.0 billion to $86.5 billion for the crucial holiday quarter
Amazon also said it expects holiday-quarter operating income to be between $1.2 billion and $2.9 billion.
Net sales rose to $69.98 billion from $56.58 billion in the third quarter ended Sept. 30.