Jeff Bezos enjoyed the title of world's richest man for several hours, before he had to relinquish it back to Bill Gates after AMZN stock dumped after hours when the company reported Q2 net income of $197 million, or $0.40 per diluted share, down from $857 million, or $1.78 in Q2 2016. This was on revenue of $37.955 billion, above expectations of $37.18 billion, and well higher than the $30.404 billion reported last year.

Where the market was especially focused, and perhaps disappointed, is that the closely followed AWS segment reported net sales of $$4.1 billion, in line with expectations, however the operating income of $916 million, missing expectations of a $1 billion print, and just above last quarter's print of $890 million. More troubling was the decline in margin, which dipped to 22.3% from 24.3% last quarter as a result of a 15% increase in expenses, likely due due to Amazon's investment in data center infrastructure.

Also notable is that while total LTM Free Cash Flow of $9.7bn rose 26%, FCF less finance lease principal repayment and capital lease assets, was just $1.5 billion, a drop of 48% Y/Y.

Most importantly, Amazon also reported Q3 net sales guidance of $39.25 to $41.75 billion, relative to the estimate of $39.97 billion as well as an operating income range of a loss of $(400) million to +$300 million, compared with $575 million in third quarter 2016. According to Bloomberg, Amazon's guidance was disappointing, especially its projection of a potential loss in the third quarter. Its full guidance:

• Net sales are expected to be between $39.25 billion and $41.75 billion, or to grow between 20% and 28% compared with third quarter 2016. This guidance anticipates an unfavorable impact of approximately $125 million or 40 basis points from foreign exchange rates.
• Operating income (loss) is expected to be between $(400) million and $300 million, compared with $575 million in third quarter 2016.

Offsetting the poor guidance was AMZN's gross margins, which were relatively healthy at 38.27%, narrowly exceeding the 38.1% estimate. Amazon’s gross margins have been rising gradually over the past decade, from under 30 percent in 2014 and under 25 percent in 2010. But with its flimsy guidance, the company may be signalling that it is getting ready to enter into another investment cycle, with expenses rising faster than sales. That, according to Bloomberg, makes investors nervous.

One bright spot for Amazon.com investors, is that retail revenue growth is strong, beating expectations both in North America and abroad with 23% growth over the same quarter last year. Amazon has now notched 20 straight quarters of retail growth over 20%.

Earnings in a snapshot:

• 2Q Revenue $38.0BN, vs est. $37.2b
• 2Q GAAP EPS $0.40, vs est. $1.42
• 2Q AWS $916mm operating income, exp. $1.0BN
• 2017 GAAP EPS est. $6.72 (range $4.09-$8.93)
• 2017 rev. est. $166.6b ($162.07b-$173.16b)
• Sees 3Q operating loss $400 million to operating income $300 million, estimate profit $863.5 million
• Sees 3Q net sales $39.25 billion to $41.75 billion, estimate $39.97 billion

Jeff Bezos was as usual optimistic. In his prepared remarks, he tends to mention the products, services and areas of growth which he is personally emphasizing inside the company, according to BBG.  In the latest release, he highlighted the screen-equipped Echo Show, Prime Video, new initiatives in the U.K., Germany and Singapore, the opening of 3 new Amazon bookstores and the rollout of new airplanes in the Amazon supply chain fleet. These are the company’s avenues of expansion -- things to watch over the months and years ahead

“Our teams remain heads-down and focused on customers,” said Jeff Bezos, Amazon founder and CEO. “In the last few months, we launched Echo Show (our newest Echo device with a video screen), introduced calling and messaging via Alexa on all Echo devices, debuted Inside Edge on Prime Video (the first of 18 Indian Original Series), introduced Amazon Channels in both the U.K. and Germany, launched four new Fire tablets, expanded Amazon Fresh to Germany, launched Prime Now in Singapore, launched our 25th airplane with Prime Air, hired more than 30,000 new employees, opened three new Amazon Books stores, launched more than 400 significant AWS features and services, migrated more than 7,000 databases using AWS Database Migration Service, and held our third annual Prime Day — signing up more Prime members than ever before. It’s energizing to invent on behalf of customers, and we continue to see many high-quality opportunities to invest.”

Despite the company's generous spending ways, analysts have said that high margin streams of revenue like those from its advertising, subscription and credit card businesses are expected to continue to grow and help offset higher spending.

Finally, for all the concerns about AMZN's cash burn, the company reported LTM Free Cash Flow in Q1 of $9.7 billion.

After fading modestly in Q1, AMZN's operating margin slumped further in Q2, to 1.7% from 2.8% .

Also notable, as of June 30, Amazon employed some 382,400 mostly part-time workers, an increase of 31,400 from the previous quarter.

Finally, after a significant rise in the company's LTM operating margin in the past two years, it appears to have plateaued once again, and in the current quarter it slumped back to 2.3% from 2.9% in Q1.

Putting it all together, between the earnings miss, the AWS margin drop, the declining free cash flow, and the poor guidance, and the stock was down over 2% in the after hours, pushing Bezos back into the world's second richest man spot once again.