(Reuters) - Amazon.com Inc on Thursday 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.
Shares fell 7%, as revenue growth for the company’s lucrative cloud computing business also slowed down in the third quarter, missing analysts’ estimates. Amazon beat expectations on overall third-quarter revenue, posting sales up 24% to $70 billion.
The news underscores the big investment Amazon is making to cut delivery times to one day for its Prime loyalty members, a way to outmaneuver rivals such as Walmart Inc that have marketed two-day shipping without subscription fees.
Costs for that program will nearly double during the holiday season, from more than $800 million Amazon spent on one-day delivery during the second quarter, the company’s Chief Financial Officer Brian Olsavsky said on a call with reporters.
Expenses rose because the company has to move inventory closer to customers and beef up its last-mile transportation footprint, a big expense, to make the plan work, Olsavsky said. The company also is giving up the fees that customers used to pay for one-day delivery, he said.
Still, Amazon is betting that fast delivery will spark sales, a strategy that over years has helped it become the world’s largest online retailer.
“We came in at the high end of our revenue range,” Olsavsky said of the third quarter. “We see it as a real indication of the strength of the Prime one-day program.”
The company now has more than 100 million paid subscribers to Prime, who keep returning to
