Amazon posts huge loss in second quarter, despite sales rise

Amazon Fire Game Controller

Amazon has reported a rise in sales on Thursday but posted a bigger-than-expected $126m (£74m) loss for its second quarter, sending shares sharply lower in after-hours trading.

Revenue at the company rose 23% to $19.34bn but losses increased as the firm spent heavily in a bid to expand its business with its first smartphone, the Fire Phone – which goes on sale in the US today – and to expand new services including grocery delivery and video streaming.

"We continue working hard on making the Amazon customer experience better and better," said Amazon's chief executive officer, Jeff Bezos.

Shares of Amazon dipped 10%, to $358.61, in after-hours trading as the company said it expected further losses of up to $810m in the upcoming quarter – compared to a $25m loss in the third quarter last year.

Amazon's Fire Phone goes on sale in the US on Friday, facing stiff competition in a market dominated by Apple, Samsung and others. The company surprised many by launching a high-end, technologically advanced phone at a premium price and there has been scepticism among analysts about its likely success.

Before the earnings announcement Colin Gillis, director of research at analyst BGC, issued a report on the company that began with the haiku: "It's a feat to lose money with $20bn in net revenue."

The company's shares had already slumped close to 10% before the latest results were released. Amazon said it expected another big hike in revenues next quarter to between $19.7bn and $21.5bn, 26% higher than a year ago.

The company has long argued it is focusing on building a business for the long-term and shown little concern about losses. Recently Amazon has been even more ambitious than usual. Along with the phone and groceries, it introduced Zocalo, a document storage and sharing service, and a programme to give readers access to as many ebooks as they want for a monthly fee.

Amazon's ambitions have also put it at loggerheads with publishers. The retailer is in a long-running dispute with Hachette about the price of e-books that has led to it delaying shipments of books from best selling authors including JK Rowling, Stephanie Meyer, David Foster Wallace, and Donna Tartt, author of this year's Pulitzer Prize winner, The Goldfinch.

Amazon also clashed with Warner, briefly pulling pre-orders of DVDs of its blockbuster The Lego Movie among other titles amid another pricing dispute.

Powered by Guardian.co.ukThis article was written by Dominic Rushe in New York, for The Guardian on Thursday 24th July 2014 23.36 Europe/London

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