Amazon shares drop following disappointing third quarter

Retail and web giant misses earnings per share forecasts, and announces a slew of updates for AWS

Amazon's share price has dropped after it reported lower than expected third quarter results, and warned investors to expect a disappointning fourth quarter.

The firm's revenue for the quarter did hit expectations, with a 29 per cent lift to $32.7bn, compared with $25.4bn in third quarter 2015, however earnings per share were 52 cents, far short of the 78 cents which had been expected.

Amazon's costs also rose, with operating expenses climbing 31.5 per cent to $10.94bn following heavy investment in Amazon Web Services, the exopansion of its Prime programme internationally, and its warehouse and delivery infrastructure.

The firm's shares fell by more than five per cent following the announcement.

The outlook for the final quarter of 2016 was worse than expected, with Amazon forecasting net sales of between $42bn and $45.5bn.

Most industry analysts had expected fourth quarter sales of at least $44.58bn, partly due to the Christmas period which falls in the quarter and boosts sales significantly.

The report includes a raft of announcements for Amazon Web Services (AWS).

• Amazon Web Services (AWS) announced the availability of the US East (Ohio) Region. AWS now operates 38 Availability Zones across 14 technology infrastructure Regions globally, and plans to open an additional nine Availability Zones in four regions (Canada, the UK, France, and a second region in China) in the coming months.
• VMware and AWS announced a new hybrid cloud service, "VMware Cloud on AWS," that enables customers to use their existing VMware software and tools to leverage AWS's global footprint and breadth of services, including storage, databases, analytics, and more. This offering will be the primary public cloud service sold and supported by VMware, and AWS will be VMware's primary public cloud partner.
• AWS announced the availability of P2 instances, a new GPU instance type for Amazon EC2. The most powerful GPU virtual machine in the cloud with up to 16 NVIDIA Tesla K80 GPUs, P2 instances are designed for compute-intensive applications such as artificial intelligence, deep learning, computational fluid dynamics, computational finance, seismic analysis, molecular modeling, genomics, and rendering workloads.
• AWS announced the option for customers to bring their own encryption keys with AWS Key Management Service. This new feature allows customers to import keys from any key management and Hardware Security Module solution and use them with AWS services and their own applications.
• AWS launched new capabilities for AWS Educate, a global program that provides students and educators with resources to accelerate cloud-related learning. The program now includes access to courses designed to teach cloud skills, paired with the AWS Educate Job Board, featuring cloud-related internships and jobs from top employers around the world.
• AWS announced a new Application Load Balancer option for content-based routing that enables customers to route a request to an AWS service based on the content of the request and supports applications that run in containers. Web sites and mobile applications, running in containers or on Amazon EC2 instances, will benefit from the use of Application Load Balancers.