It might be a blue Christmas for Amazon.
The world's largest retailer gave a disappointing forecast for the crucial holiday quarter. The company also reported a wider loss than analysts expected for the third quarter.
Thursday's financial results could end investors' patience with Amazon's slim profit and its strategy of investing heavily in new products and services to spur revenue growth. The stock price tumbled 11% in after-market trading. That's on top of the 22% decline the stock has already suffered this year.
Amazon has long focused on spending the money it makes to grow and expand into new areas. It launched a smartphone, the Fire, earlier this year, and has been offering a set-top video streaming device, a streaming video service and several tablets and e-book readers.
The company has also been investing in services for its $99-a-year loyalty program, Prime. It has added a grocery delivery services and music streaming for Prime members as well as offering original TV shows such as the critically acclaimed "Transparent" starring Jeffrey Tambor.
But it is increasingly clear that what investors want more than revenue growth is a solid profit.
"The market was looking for more in terms of revenue and operating income and the fourth-quarter outlook," said Morningstar analyst RJ Hottovy. "It's going to be a competitive landscape for retailers this holiday season and retailers will compete aggressively for consumers."
In a conference call with analysts, chief financial officer Thomas Szkutak defended its strategy and said the company is focused on "using its capital wisely so that over time we get good returns on invested capital."
But he agreed the company needed to be "selective" on new projects after years of a seemingly endless array of ventures.
Amazon said it expects holiday quarter revenue of $27.3 billion and $30.3 billion, below analyst expectations of $30.9 billion. That's an increase of 7% to 18% - slower growth than the prior-year holiday quarter when sales rose 20%.
Szkutak said the stronger dollar will hurt fourth quarter revenue by about 2.5 percentage points.
The holiday period is crucial because retailers make a chunk of their annual profit, about 20%, in November and December. Overall, the National Retail Federation expects sales during the period to be up 4% to $617 billion.
Amazon CEO Jeff Bezos said the company was focused on making the holidays "easier and more stress free" than ever. The company has hired 80,000 seasonal workers and has expanded its Sunday shipping service. It now has more than 50 distribution centers in the US, up from 40 last year. And in July it announced it was opening eight smaller sorting centers for a total of 15 by the end of the year.
Speed of shipping is going to be a key for any retailer this holiday season, Hottovy said. Amazon offers free two-day shipping on many products through the $99-a-year Prime membership. But competition is heating up: Target said Tuesday that it would offer free shipping on all items this holiday season.
"Last year, retailers figured out price matching wasn't enough," Hottovy said. "You have to get products to consumers quickly and cheaply as well."