Amazon’s Profits Plunge 57%
Business + Economy

Amazon’s Profits Plunge 57% shares slumped after the largest Internet retailer said it may lose money in the first quarter, a sign the company is continuing to spend heavily on expansion and new ventures.

The online retailer has been growing at least twice as fast as the e-commerce sector in recent years. To keep up that pace, the company is expanding into new categories and regions, spending heavily on growth and crushing profit margins.

Amazon's first-quarter forecasts suggest the company may continue this heavy investment, at the expense of shorter-term profit.

"Amazon is not a cheap stock, so any type of disappointment, we typically see a pretty meaningful reaction by the market," James Lee, analyst at Credit Agricole, said.

Amazon was expected to make $426.5 million in the first quarter of 2012, according to a survey of six analysts by Thomson Reuters. These estimates include stock-based compensation and other expenses.

Amazon said fourth-quarter net income was $177 million, or 38 cents per share, down from $416 million, or 91 cents per share, a year earlier.

Revenue came in at $17.43 billion, up 35 percent from the fourth-quarter of 2010.

Amazon forecast first-quarter operating results ranging from a loss of $200 million to a profit of $100 million. That includes about $200 million for stock-based compensation and other expenses.

"Margins beat, but the outlook was disappointing on both top line and bottom line," said Ken Sena, an analyst at Evercore.

Amazon forecast first-quarter revenue of $12 billion to $13.4 billion. Wall Street was looking for $13.4 billion, according to Thomson Reuters I/B/E/S.

Amazon shares dropped 8.1 percent to $178.70 in after-hours trading following the results.