Amazon profits slump as retail giant spends big

US ecommerce colossus Amazon has recorded a 77% drop in quarterly income as it spends heavily in order to boost growth.

The Seattle-based tech group reported a net profit of $197m, significantly below the $857m profit posted in the corresponding quarter of 2016.

Jeff Bezos and the company’s board has pressed on with plans to expand its operations well outside its traditional online shopping arm, with particularly large focus on its cloud computing offering.

Amazon’s sales for the period between April and June were up 25% to $38bn, levels of growth that is leaving its brick-and-mortar competitors struggling to keep up.

The company’s shares have been boosted 39% in the last year, but fell over 3% in after-hours trading following the release of the quarterly results.

The company’s shares have been boosted 39% in the last year

Last month Amazon announced it planned to purchase supermarket chain Whole Foods for $13.7bn, as it seeks to gain a tighter stronghold over the grocery sector.

CFO Brian Olsavsky told reporters after the release said there were no plans to slow down the company’s investments.

"Q3 is generally a high investment period," Olsavsky said. "Our video content spend will continue to grow, both sequentially and quarter over quarter."

The focus on video is seen by many as a long-term investment to win subscribers and compete with streaming site Netflix in the entertainment field.

Michael Hewson, chief market analyst at CMC Markets, said the early sell-off should not put investors off Amazon.

“Investors need to be wise to the fact that adding subscriber numbers and market share requires new content and that costs money, and between them Amazon and Netflix are spending over $10bn between them over the next year or so, which means they need to start pricing that in,” Hewson said.