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There wasn’t much good that came out of Inc.’s third-quarter results, released after the market closed on Thursday.

Amazon’s (NASDAQ: AMZN) net sales were $127.1 billion in the quarter, higher than the $110.8 billion in the year-earlier quarter but a bit lower than the consensus estimate of $127.5 billion. Operating income was nearly cut in half to $2.5 billion, reflecting a near $20 billion increase in operating expenses. Net income dropped by nearly $300 million year on year to $2.8 billion.

Diluted earnings per share fell to 28 cents from 31 cents. Analysts polled by Barchart expected 22 cents per share.

Fourth-quarter guidance was not especially strong. Net sales are expected to be between $140 billion and $148 billion, which would put gains in the range of 2% to 8%. Operating income is expected to be, at best, $4 billion, compared with $3.5 billion in the fourth quarter of 2021.

A $5 billion hit due to unfavorable foreign exchange rates, about $900 million more than Amazon had modeled, took a toll on the top line in the third quarter. The company expects a more than 400 percentage point currency headwind in the fourth quarter as the U.S. dollar remains strong.

Amazon shares, which declined more than 4% during regular Thursday trading, dropped another 12.6% shortly after 6 p.m. as investors reacted to the weak results. Shares are down 34.6% over the past 12 months.

Amazon began to see sales growth decelerate as the third quarter went on, said CFO Brian Olsavsky on the post-earnings analyst call. The deceleration will continue through the peak holiday quarter that’s a month in, Olsavsky said. The slowdown is especially pronounced in Europe where consumers and businesses are grappling with geopolitical uncertainty, high inflation and fears of recession.

Olsavsky said that holiday in-stock levels are high and that delivery speeds are getting “near where we want them to be.” He didn’t elaborate on the company’s delivery performance.

Amazon needs to reduce its operating network footprint, which doubled over the past two years, to pre-pandemic levels, Olsavsky said. That will not happen in the fourth quarter due to the network stresses driven by holiday demand.

Amazon’s third-quarter shipping costs rose 10% year over year to more than $19 billion. Olsavsky said that the company’s spending on fulfillment and transportation dropped $10 billion compared to the 2021 quarter as it reduced the size of its sprawling warehouse network in an effort to better align capacity with demand.

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