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Amazon Shares Drop After Q2 Earnings Miss Estimates

Despite reporting record profits in 2018 and seeing a resurgence in consumer spending, Amazon reported mixed results in its Q2 2019 earnings report, failing to meet profit expectations, but exceeding on its revenue forecasts.

Amazon reported Q2 earnings of $2.6 billion ($5.22 a share), up from $5.07 in 2018, but lower than analysts’ estimates, while revenue clocked in at $63.4 billion, which is up from $52.9 billion in 2018.

Amazon Web Services was the most lucrative business, reporting 37% growth.

The weaker-than-expected profit comes as Amazon faces increasing competition from retailers like Walmart, who are currently making operational changes to speed up their deliveries.

“Q2’s results were negatively impacted by margin compression in North America due to the investments in next day Prime delivery, which we continue to believe is an example of short-term pain for long-term gain,” Charlie O-Shea, Moody’s Amazon analyst, said in a statement.

“The rapid delivery is a necessary strategy to compete with brick-and-mortar’s speed advantage to the customer.”

A recent CNBC report found that shorter delivery times will lead to more frequent purchases and higher revenue.

In response, Amazon pledged to spend $800 million on Q2 to improve warehouses and deliver infrastructure in a bid to make one-day shipping the standard for Prime members.

“Customers are responding to Prime’s move to one-day delivery – we’ve received a lot of positive feedback and seen accelerating sales growth,” Jeff Bezos, Amazon founder and CEO, said in a statement.

“Free one-day delivery is now available to Prime members on more than 10 million items, and we’re just getting started.”

Amazon stock slipped in after-hours trading, falling 2.5%, as the company gave Q3 profit guidance that fell well below Wall Street estimates.

The report comes as Amazon, Facebook, Google and Apple are currently caught up in US investigations into Big Tech’s market dominance.

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