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Amazon Profit Down 33 Percent on Higher Spending

Tell me if you’re heard this one before. Hugely successful internet company reports solid quarterly sales numbers, but because it is investing heavily in people and infrastructure, Wall Street slaps them down for missing Street earnings expectations. It happened last week with Google, and it just happened again. Amazon.com, the number one online retailer, reported […]

Tell me if you're heard this one before.

Hugely successful internet company reports solid quarterly sales numbers, but because it is investing heavily in people and infrastructure, Wall Street slaps them down for missing Street earnings expectations.

It happened last week with Google, and it just happened again.

Amazon.com, the number one online retailer, reported sales of $9.86 billion -- a 38 percent increase -- but because the company only earned 44 cents per share -- well below the Street's 60 cent consensus -- investors briefly pummeled the stock after hours, sending it down over five percent immediately after the earnings announcement. (Major indices hit multi-year highs on Tuesday, so some investors may have been a little trigger-happy.)

But the stock quickly bounced back, perhaps because investors remembered that for a growing company in a competitive market, investing in people and infrastructure is, in fact, a good thing over the last term.

Wall Street’s main problem was with Amazon’s operating expenses, which increased 42% in the quarter from $6.7 billion to $9.5 billion, in part because the company hired 4,200 people over the last three months. As a result, the company's profit declined 33 percent, Amazon said.

Also, Amazon added 13 fulfillment centers -- corporate-speak for regional warehouses -- last year, and said that the company would add at least nine more this year, officials told Wall Street analysts on a conference call after the release.

Now back to our tracking: Ninety minutes after the bell, Amazon shares were trading up one percent. Two hours later, two points down ...

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