What's going on?

Amazon�s stock sold off about 5% on Thursday after it reported less profit than expected in its third quarter. But that�s not necessarily bad news over the longer term�

What does this mean?

Amazon�s revenue was actually in-line with expectations � it was its profit number that, seemingly, caught investors� attention. After years of usually losing money, Amazon surprised investors with a quarterly profit last year � and it�s been profitable every quarter since (its stock price has almost doubled over that time). However, it now seems like Amazon is somewhat shifting back to its old strategy of ploughing more of its profit into developing new products (tweet this). This isn�t necessarily a bad thing � it could pay off in a big way over the longer term � but it does increase the risk for investors (e.g. perhaps Amazon doesn�t spend the money on the right new products).

Why should I care?

For the stock: Amazon�s stock has been on a tear lately – which makes it vulnerable to a selloff.
Prior to these results, its stock was up more than 20% this year. That�s a huge amount considering Amazon was already one of the world�s biggest companies. Such performance raises the bar that investors expect Amazon to clear – and so when it does something surprising, like make less money than predicted, the stock has a bit of tantrum. Investors might be somewhat warier of its future spending plans, but the long-term thesis on Amazon didn�t change on Thursday: e-commerce and cloud computing, the two industries in which it�s the number one player, are going to keep growing very quickly.


The bigger picture: Amazon is working on some artificial intelligence (AI) driven surprises.
Alexa�s �skills selection� tripled in the past quarter to over 3,000 abilities, including being able to help manage your fantasy football team. Amazon isn�t alone in developing an AI-powered assistant (Hello, Siri�), but it�s certainly well-positioned to be one of the leaders of the burgeoning space.