Amazon clobbered after a miss on the bottom line and soft guidance

Amazon stock skidded 6% in Friday's premarket, a day after the e-commerce giant's third-quarter earnings fell short of Street expectations.

In its earnings report, it also gave dismal revenue guidance for the holiday shopping season, spooking investors who were expecting a huge payoff from Amazon's growing investments across the company.

Shares plunged as much as 9% in after-hours trading.

Here's what the company reported Thursday, versus analyst expectations:

  • EPS: $4.23 vs. $4.62, according to analysts surveyed by Refinitiv
  • Revenue: $70 billion vs. $68.8 billion, according to analysts surveyed by Refinitiv
  • AMAZON WEB SERVICES: $9 billion vs. $9.1 billion, according to analysts surveyed by FactSet

Revenue grew 24% to $70 billion for the quarter, showing the heavy investment in free one-day shipping is leading to more purchases. Amazon spent over $800 million in each of the last two quarters to expand its free one-day delivery program to more products and regions and said it is expecting to spend $1.5 billion more on the initiative during the fourth quarter to expand its warehouse footprint and product selection. It also pointed to increased spending on the growing cloud business and bolstering its advertising sales force.

"Customers are buying more often and they're buying more products," Amazon CFO Brian Olsavsky said during a call with reporters.

However, Amazon's fourth-quarter revenue guidance came in at $80 billion to $86.5 billion, far below the Street's average estimate of $87.4 billion, indicating the all-important holiday shopping season may be underwhelming.

The return to a heavy investment cycle is cutting into Amazon's profitability. Its net income dropped to $2.1 billion, down 26% from the year-ago period's $2.9 billion. For the fourth quarter, Amazon is forecasting operating income to fall between $1.2 billion and $2.9 billion, also below the $4.2 billion estimate by analysts.

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Amazon's cloud business had $9 billion in quarterly sales, falling slightly below analyst expectations of $9.1 billion. AWS' operating income totaled $2.26 billion, up 9% from the year-earlier period but below the $2.55 billion FactSet consensus estimate. For the past four years, AWS has provided the bulk of Amazon's operating income, so slowing growth could be a drag on future earnings. The 35% revenue growth rate was the slowest since AWS started disclosing that number in 2015.

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In a statement, Amazon CEO Jeff Bezos highlighted the company's free one-day delivery initiative, saying it's leading to higher customer satisfaction.

"Customers love the transition of Prime from two days to one day — they've already ordered billions of items with free one-day delivery this year. It's a big investment, and it's the right long-term decision for customers," Bezos said.

Amazon's stock was up 18% this year, slightly below the 20% gain for the S&P 500.

Third-quarter results include sales from Prime Day, which the company called its biggest shopping event in history. Amazon previously said Prime Day sales surpassed those of Black Friday and Cyber Monday combined, with more than 175 million items sold over the 48-hour event.

Amazon, however, didn't provide any additional commentary around the regulatory environment, which has become a hot-button issue lately as politicians from both parties have called for heavier scrutiny of the company's business practices.

WATCH: Amazon misses on earnings, beats on revenue

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