Amazon, which is embroiled in a very public conflict with the publisher Hachette, has reported a loss of $126m (£74m) in the second quarter, nearly double what Wall Street predicted. In after hours trading in the US shares slumped by 6%.
Amazon has reported a loss of $126m (£74m) in the second quarter
Amazon shares fell by nearly 10% due to the huge spending on cloud computing according to Financial Times (FT) newspaper. Investment has resulted in a much greater financial loss than expected, and in the III quarter of 2014 online retailer is likely to remain in negative territory.
By the end of II quarter (June 30) net loss was amounted to $126 million, or 27 cents per share, while analysts expected a loss of 15 cents per share – FT adds.
Loss affected by Amazon Web Services costs – cloud service of Amazon (hosting, storage distribution, rent virtual servers), which is used by organizations ranging from the CIA and finishing Netflix supplier cloud video service, Amazon CFO Tom Shkutak said. According to Gartner analytics in 2014, Amazon Web Service is the market leader in cloud-based services – it has overtaken Microsoft, Google and IBM.
According to Shkutak, service was becoming more and more popular and showed the growing popularity of more than 90%: "Seeing this trend, we understand that we must make the investments in infrastructure, as we should support growth".
Amazon was invested in equipment as well as in the staff – Shkutak reported that cloud division of the company hired several thousand specialists. Cloud business also expanded by 250 new services, he added.
Expanding the outlook for the current quarter, Amazon even more upset investors: the company plans an operating loss for the last three months in the range of $410 million to $810 million.
Amazon supporters argue that the company's profitability depends on careful management as the company's commitment to attract customers into new areas of business requires investment. Skeptics argue them: in their view, the company is not getting enough profit that would justify its market capitalization of more than $150 billion.