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Amazon.com Inc. (AMZN-Q) forecast a possible loss in the current quarter on Thursday as the world's largest Internet retailer spends heavily on warehouses, technology and digital content.
Second-quarter revenue was $12.83 billion US, up 29 percent from a year earlier. Net income was $7 million, or one cent per share, versus $191 million, or 41 cents a share, a year earlier, the company said.
Amazon, the world's largest Internet retailer, forecast third-quarter revenue of $12.9 billion to $14.3 billion. Analysts were forecasting $14.1 billion, according to Thomson Reuters I/B/E/S.
Amazon also forecast a third-quarter operating loss of $50 million to $350 million. Excluding stock-based compensation and other items, the forecast was between a loss of $75 million and a profit of $225 million.
Analysts at JP Morgan, Raymond James and Caris & Co. were looking for third-quarter operating profit of $258 million, $280 million and $388 million respectively. Those forecasts excluded stock-based compensation and other items.
"The real story here is around guidance - it was a little bit light from what people were expecting and the bottom line much lower than what people would have expected," said Needham and Co analyst Kerry Rice.
"They're going to spend to build the infrastructure and capacity to deliver the products and services that they feel the consumer wants," he added. "I don't know that we can say they are investing or spending too much. It's certainly more than people expected."
Amazon is in the midst of a massive investment phase that has hammered earnings over the past year. The company is spending heavily on overseas expansion and building out its network of storage and shipping warehouses.
It's also developing a mobile platform that includes the Kindle Fire tablet computer and possibly other mobile gadgets such as a smartphone. The company has been investing a lot in digital content to deliver over this platform, including movies, TV shows, music, apps and games. This has intensified competition with Apple, Google and even Microsoft and Facebook.
During a conference call with reporters on Thursday, Chief Financial Officer Tom Szkutak said operating expenses are growing faster than revenue and suggested that this may continue.
"We're investing a lot because of the opportunities we see," the CFO said.
Amazon is spending a lot in the third quarter because it is preparing for the crucial holiday shopping season, he explained. Much of that investment is going into the company's new warehouses; it plans to open 18 this year.
The company also plans to keep investing a lot in video content and technology infrastructure to support its cloud computing and online retail businesses, the CFO said.