Amazon shares drop after profits miss expectations

The stock was down by more than 13% at $85.35

Amazon CEO Jeff Bezos (Getty)

Amazon shares tanked on Thursday night after the e-commerce website’s fourth quarter profits were much weaker than expected.

The stock was down by more than 13 per cent at $85.35 (£59.65) at the end of after-hours trading after Amazon revealed net profit of $482 million, or $1 per share for the its Christmas quarter ended December 31.

That compares with $214 million, or 45 cents per share, a year earlier, but was far less than the $1.56 per share analysts had expected.

Net sales were 22 per cent higher at $35.7 billion versus a forecast of $35.93 billion.

A rise in operating costs plus renewed concerns over its low margins and heavy investments away from its core business raised questions for investors.

“By comparative retail standards, Amazon's level of profitability is still painfully weak,” said Neil Saunders, head of retail analyst firm Conlumino, who is still positive on Amazon's prospects.

“For every dollar the company takes, it makes just 0.75 of a cent in profit.”

Amazon chief financial officer Brian Olsavsky defended the results, adding that foreign exchange rates had an unexpectedly large impact, but overall the company had “a very strong quarter and a strong year.”

He said that Amazon would continue to spend on projects including its cloud computing and Prime services, with plans to add more original video content.

The company is gearing up to stream highly anticipated programmes including Woody Allen's first TV series, which will star Miley Cyrus, and a car show fronted by former Top Gear trio Jeremy Clarkson, James May and Richard Hammond.

However, he added “the investments will ebb and flow over time, but our focus on cost reductions and improvement on customer experience will be constant.”

Amazon reported a 51 per cent rise in membership of Prime, which analysts have estimated has about 50 million subscribers worldwide.

Additional reporting by Reuters