Is Amazon slowing down?

Amazon's 'meh' quarter shows some troubling trends, according to analysts

Amazon's quarterly results are fairly unpredictable, since the company is known for taking any and all profits and reinvesting them in the business. It's great for Amazon and its customers, but bad for analysts, whose estimates for Amazon tend to cover the entire spectrum. So Thursday's earnings report was confusing. While Amazon beat analysts' expectations for income, the company came in below on revenue.

Shares were down 7% Friday morning to $255 after Amazon reported its mixed first quarter earnings. Yesterday the stock had climbed to $274. Overall, the stock is up 31% from last April.

"There are clearly a lot of moving pieces in Amazon’s business and we recognize they may not all move together in any one quarter. But even at 35% gross profit growth and 30% unit growth—strong absolute levels—they do represent a more material slowdown compared to results in recent quarters," wrote J.P. Morgan's Doug Anmuth, in a research note Friday. "Amazon pointed to some macro softness overseas and a tough unit comp from a year ago, but we also believe that traditional retailers are losing less relative share as they increase selection online, price match more aggressively, and work to combat showrooming."

Anmuth says that Amazon is now growing at twice the rate of the rest of the e-commerce industry as a whole--which is still great, but it still represents a slowdown from Amazon's previous quarters, when it was growing at three times the rate of the e-commerce industry. 

Revenue came in at $16.07 billion for the quarter, which is up 22% from the same quarter last year, but it missed analysts’ estimates by a few million. Street consensus had Amazon’s revenue pegged at $16.16 billion, with high estimates at $16.55 billion. In the same quarter last year, Amazon raked in $13.18 billion in revenue.

But net income came in above analysts’ expectations, even though it decreased a whopping 37% to $82 million, or $0.18 a share. The Street was expecting $0.09 a share in EPS. To compare, Amazon posted earnings of $130 million, or $0.28 a share in the same quarter last year.

Operating income was down 6% to $181 million in the March quarter, from $192 million in the same quarter last year. But the company said that the decrease in operating income was the result of foreign exchange rates, which had a $12 million negative impact. 

“Amazon Studios is working on a new way to greenlight TV shows. The pilots are out in the open where everyone can have a say,” said CEO Jeff Bezos, in a statement. “I have my personal picks and so do members of the Amazon Studios team, but the exciting thing about our approach is that our opinions don’t matter. Our customers will determine what goes into full-season production. We hope Amazon Originals can become yet another way for us to create value for Prime members.”

Indeed, Amazon is looking to get cozier in customers’ living rooms. With an emphasis on developing its own original programming, Amazon is also reportedly developing a Kindle TV set-top box that would beam content directly to customers’ TVs and would be revealed this fall. Amazon had unprecedented success with its Kindle line of e-readers and tablets, but a TV set-top box…meh. It’s been done. Those of us who don’t play video games have a Roku, Boxee, or AppleTV. Meanwhile, the rest of the human population has an Xbox, Wii, or PlayStation.

The company is also rumored to be developing a Kindle phone. 

The company’s foray into original programming is already proving fruitful. Earlier this week, Amazon announced that eight of the pilots released last Friday made the company’s top 10 most-watched titles.

Amazon is setting its guidance for the June quarter at $14.5 billion to $16.2 billion in revenue, with operating income of a loss of $340 million to a profit of $10 million. 

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