Amazon's Q3 financial report is amazing! Is the profit expected to be cut in half?

Last week, Amazon released its third-quarter financial report for this year. The report showed a shocking fact: for the first time, Amazon’s growth did not meet the forecasts of data agencies, and the growth rate began to slow down significantly!

Amazon's forecasted revenue for Q3 was $111.6 billion, while the actual revenue was about $110.81 billion. Although the difference is not much, only about one percent, this is the first time that Amazon has not reached analysts' forecast revenue since the epidemic. The financial reports of each quarter before were very good and exceeded the forecasts of data agencies. When Amazon released its financial report this time, it mentioned that as the epidemic slowed down, consumers were returning to physical stores, and the official had fully taken into account the slowdown in sales growth. Amazon's revenue growth in the third quarter of this year was only 15%, far lower than the 37% of the same period last year, and not even half of it.

Not only that, Amazon officials also made predictions on profits and revenues for the upcoming year-end peak season, Q4. Logically, this should be the quarter with the highest revenue, but Amazon actually believes that its profits are about to be cut in half!

Amazon expects sales to be between $130 billion and $140 billion in the fourth quarter, an increase of 4% to 12%. Analysts expect revenue to grow 13.2% year-on-year to around $142.1 billion. The problem lies in the profit forecast. Amazon expects its operating profit in the fourth quarter to be around $3 billion. This is a direct cut compared to its operating profit of $6.9 billion in the same period last year!

New CEO Andy Jassy said that due to labor shortages, rising employee costs, global supply chain restrictions, and increased freight and transportation costs, the company expects to incur billions of dollars in additional costs in the consumer business in the fourth quarter. This will be one of the main reasons for the halving of profits. Amazon is currently dealing with these high-investment business contents, including expanding the scale of warehouses and logistics personnel, and cooperating more deeply with docks and truck companies to solve cargo transportation and unloading problems.

After Amazon benefited greatly from the epidemic, its sales finally saw a slowdown in growth. However, the slowdown does not matter because Amazon already has a new profit growth point - service revenue from third-party sellers.

According to the financial report, Amazon's revenue from third-party services in the third quarter, including Amazon store commissions, Amazon advertising, store subscription fees, logistics fees, etc., totaled more than 24.25 billion US dollars. In addition, sales from AWS cloud services have reached 55.9 billion US dollars, while Amazon's product sales in Q3 were only 54.9 billion US dollars. This is the first time in history that third-party service revenue has exceeded product sales!

Amazon's crazy surge in the post-epidemic era has brought a large number of new sellers to Amazon. The speed at which the cake is getting bigger cannot keep up with the speed at which the number of people sharing the cake is increasing. This is the fundamental reason why Amazon's market has become larger after the epidemic, but we sellers feel more and more involuted. We are all involuntarily, fighting a crazy price war, and the beneficiaries are neither consumers nor us. Only the platform is the eternal winner. This financial report fully demonstrates this point.

You see, there is no way out by desperately rolling up the price, it will only make Amazon earn more and more. Moreover, raising prices and refusing to offer low prices does not mean that the products cannot be sold. Many small and medium-sized sellers can maintain a profit margin of about 15% to 30%. With a high profit margin, they can make money by doing a 10% or 10% discount event. It can be said that this is a very comfortable range. If you are willing to raise prices but don’t know how to do it specifically, you can chat with me privately, and I will give you free answers! Let us reject internal competition and raise prices to make money!