The online retailer, billed as the world's largest and one of U.S.' most highly valued companies, suffered losses despite increase in its sales which climbed 23% and amounted to $19.3 billion. Together with sales, expenses also climbed 24% at $19.4 billion. The latter is attributed to the company's rapid investment ventures in new markets such as consumer electronics and digital content.
Amazon proved before that it could successfully retail huge numbers of products to millions of people. Likewise, the company is also confident that it could create new businesses and enhance those which it currently has. However, analysts are questioning on whether the company's new business investments could really bring in profits.
Officials from the company seemed unperturbed. Through a conference call, chief financial officer Thomas J. Szkutak says, "We're not trying to optimize for short-term profits. We're investing on behalf of customers and share owners. We're fortunate to have these opportunities."
Amazon believes that the second-quarter losses are caused by the price competition in its Amazon Web Services (AWS), the company's cloud-computing venture. The business resulted in price cuts from 28% to 51% in order for the company to maintain its lead from rival companies such as Microsoft, IBM, and Google.
On a positive note, the cuts enabled a usage growth in AWS at the rate of 90 percent. However, it also resulted to a much slower growth in revenue compared to the information on the company's official records.
Szkutak reiterates the fact that the company's slower growth had been caused by the aforementioned price cuts. "It certainly did impact our second quarter results in a meaningful way," he said.
Prior to the company's announcement of its financial report, Amazon has already experienced a drop of 10 percent on its stock price in 2014. Investors are not confident about the company's long term growth which seemed to be overshadowed by its meager or almost unnoticeable profit.
Shares fell another 10 percent after the second quarter report was released by Amazon. The company revealed a loss of 27 cents for every share which is almost twice the estimated 15 cent loss given by Wall Street.
Looking ahead, Amazon forecasted an operating loss that could go between $410 million to $810 million for its next quarter report that is scheduled in September. Compared to the $25 million worth of losses incurred the previous year, the company's forecast shows that it should be preparing hard for the sharp increase in losses coming in just a few months.
