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(Reuters) –     Amazon.c** Inc on Thursday forecast a slowdown in sales growth for the holiday season, disappointing Wall Street and warning that inflation-wary consumers and businesses had less money to spend.

Shares fell 17% in after-hours trade.

For months, the world’s biggest online retailer has fought against troubling macroeconomic tides. It hosted not one, but two cornerstone sales events in a year: Prime Day in July, and the Prime Early Access Sale this month.

For the summer event, it indeed sold more items than ever before to its loyalty shoppers, and meanwhile the co*pany sought revenue from higher Prime subscription fees and a surcharge on some merchants.

Net sales were $127.1 billion in the third quarter ended Sept. 30, still little lower than the $127.5 billion analysts expected, according to IBES data from Refinitiv.

But the economic outlook has not brightened. In a call with reporters, Brian Olsavsky, Amazon’s chief financial officer, said the co*pany was bracing for slower economic growth.

“We are seeing signs all around that, again, people’s budgets are tight, inflation is still high, energy costs are an additional layer on top of that caused by other issues,” he said. “We are preparing for what could be a slower growth period, like most co*panies.”

While Amazon would continue to fund earlier-stage businesses like its lucrative cloud-co*puting and advertising divisions, it would question costs elsewhere and proceed carefully on hiring, he said.

“It’s possible that retail sales will decline year-over-year. I don’t actually believe that will happen, but the market definitely doesn’t like it,” said Wedbush Securities analyst Michael Pachter.

Amazon forecast net sales of between $140 billion and $148 billion, or growth as little as 2% from a year earlier. Analysts were expecting $155.2 billion.

Prior holiday quarter sales growth was 9% in 2021 and 38% in 2020.

CLOUD MISSES

Across the retail sector, U.S. online sales are expected to rise at their slowest pace in years this holiday season. Results in the tech industry were just as poor this week for cloud-co*puting rivals Microsoft Corp and Alphabet Inc’s Google, adding to recession fears. U.S. consumer confidence did a U-turn in October.

Amazon Web Services (AWS), the co*pany’s lucrative data-storage and co*puting division serving enterprises, only helped so much. While it provided much-needed operating inco*e, just like rival Microsoft, Amazon fell short of estimates.

It increased third-quarter cloud sales 27.5% to $20.5 billion, while analysts had expected more than $21.1 billion.

Facing high inflation and receding consumer demand, new Chief Executive Officer Andy Jassy has raced to control costs across Amazon’s vast array of businesses.

Amazon has slowed warehouse openings and refrained from filling some open positions. It announced it would shut down its virtual healthcare service by year end, and it is scaling back a long-touted effort to deliver goods via small autonomous sidewalk cars.

Still, worldwide shipping costs grew 10% in the third quarter to $19.9 billion. Amazon’s net inco*e also decreased to $2.9 billion in the third quarter, while beating analysts’ average estimate of a $2.2 billion profit, according to IBES data from Refinitiv.

In a statement, Jassy said, “There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without co*promising our key long-term, strategic bets.”

(Reporting by Tiyashi Datta in Bengaluru; Editing by Anil D’Silva and Aurora Ellis)