Amazon forecasts a cautious Q3 outlook as customer spending remains low

Amazon expects a cautious outlook, as the fall in discretionary spending and lower consumption patterns will continue into the third quarter, the retail giant said late Thursday.

The Seattle-headquartered company expects its Q3 net sales to be between $154 billion and $158.5 billion, rising 8%-11% compared to Q3 2023.

Amazon’s cautious forecast overshadowed the company’s quarterly profit rise to $13.49 billion from $6.75 billion in the quarter ended June 30, 2024, helped by increased sales across its three main segments—North America, International, and Amazon Web Services (AWS).

“We’re continuing to make progress on a number of dimensions, but perhaps none more so than the continued reacceleration in AWS growth,” said Andy Jassy, Amazon President and CEO.

Amazon reported a 9% rise in its quarterly net sales of about $150 billion annually.

AWS segment

The company said that a resurgence in company spending on modernising infrastructure and completing a significant majority of cost optimisation efforts has contributed to AWS, its cloud computing division's, quarterly growth.

AWS reported net sales of $26.28 billion in Q3 compared to $22.14 billion in the same period last year.

“As companies continue to modernise their infrastructure and move to the cloud, while also leveraging new Generative AI opportunities, AWS continues to be customers’ top choice…,” Jassy added.

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North America and international business

The ecommerce distributor reported an 8.3% rise in its North American segment. While lower-than-expected seller fees and lower average selling prices might compress short-term revenue, Amazon remains optimistic about these trends as it continues to target sales growth, low prices, and delivery.

According to the company, its international segment reported a 6.2% rise in net sales to $31.66 billion, helped by positive customer response to low prices, broad selection, and fast shipping offers.

Amazon aims to reduce costs by expanding automation and robotics and regionalising its inbound network to enable speedy and consolidated order delivery. However, these improvements might take some time.

“Advertising remains an important contributor to profitability in the North America and international segments. And we saw strong growth on an increasingly larger revenue base this quarter. We continue to see opportunities to further expand our offering in areas that are driving growth today like sponsored products, as well as newer areas like Prime Video ads,” said Brian T. Olsavsky, Senior Vice President and Chief Financial Officer of Amazon.