Amazon Founder and CEO Jeff Bezos addresses the audience during a keynote session at the Amazon Re:MARS conference on robotics and artificial intelligence at the Aria Hotel in Las Vegas, Nevada on June 6, 2019.

Mark Ralston | AFP | Getty Images

Amazon‘s third-quarter earnings fell short of street expectations on Thursday, driving its stock down as much as 9% in after hours trading.

Here’s what the company reported 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
  • AWS: $9 billion vs. $9.1 billion, according to analysts surveyed by FactSet

Revenue grew 24% to $70 billion for the quarter, showing the heavy investments across the company are paying off. Amazon spent over $800 million in the second quarter to expand its free one-day delivery program to more products and regions, and is expected to continue investing in the program for the foreseeable future. It also pointed to increased spending on the growing cloud business and bolstering its advertising sales force.

But Amazon gave fourth-quarter revenue guidance in the range of $80.0 billion and $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 operating income dropped to $3.2 billion, down 15% from the year-ago period’s $3.7 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 street estimate.

Amazon’s cloud business, meanwhile, 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-ago 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.

In a prepared 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&P500.

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.

Investors will look for additional commentary around the regulatory environment, as politicians from both sides of the aisle have recently called for heavier scrutiny of the company’s business practices.

WATCH: Here’s what analysts are expecting from Amazon earnings

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