Here's Why Amazon Says It Will Lose A Whopping $410-$810 Million This Quarter
In its press release, Amazon said that about $410 million of that will go to stock-based compensation, but what about the other potential $400 million?
In Amazon's earnings call, CFO tom Szkutak explained several major contributors to the expected losses: Investment in Amazon Web Services, digital content, and the development of new fulfillment and "sortation" centers.
Szkutak says that AWS usage grew by 90% year-over-year and that the company plans on continuing to invest heavily. This year, Amazon released 250 new services and features. It also gave users more discounts (just days after Google cut prices for its cloud services earlier this year, Amazon slashed its own prices, proudly touting 42nd price-cut in six years).
Szkutak also also said that the company plans to spend more than $100 million on original video content in the third quarter. Amazon wants to beef up its Prime Instant Video content to make its $99 Prime subscriptions more attractive to potential members. The more people who sign up for Prime, the better for Amazon (people with Prime spend almost double the amount on Amazon as non-members).
Finally, on its constant quest for speedier delivery, Amazon is adding six new fulfillment centers and 15 or more "sortation" centers. The point of sortation centers is to making shipping more efficient. Amazon sends prepared customer packages to sortation centers where they're then sorted and shipped to individual post offices, which Szkutak says helps get product to customers faster, and on Sundays (Amazon now delivers on Sundays to 17 cities).
Despite Szkutak's explanations, investors on the call still seemed skeptical. Although they've typically accepted Jeff Bezos' mantra of taking losses now for long-term success, the stock plunge is clearly an indicator that they're running out of patience.
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.
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