Business at Amazon is surprisingly bad – high costs weighed on the world’s largest online retailer at the beginning of the year. Operating profit collapsed in the first quarter compared to the same period last year by 58 percent to 3.7 billion US dollars (3.5 billion euros), as the group announced on Thursday after the US stock exchange closed in Seattle. Sales increased by seven percent to 116.4 billion US dollars – Amazon recorded the weakest growth since the so-called dot-com crisis two decades ago.
The pandemic and the war in Ukraine have led to “unusual challenges,” said Amazon CEO Andy Jassy. The company’s expenses are growing faster than revenue given the tight US labor market and global supply chain and logistics issues. Amazon bucked inflationary pressures in the first quarter with price increases for its Prime service, which includes free shipping and streaming services, and higher fees for merchants. But that could not save the balance sheet.
Investors reacted with shock and temporarily dropped Amazon’s shares by around ten percent in the after-hours trading. This should take the price to its lowest level since mid-2020 when regular trading begins on Friday. The business forecast for the current quarter was also disappointing. Amazon announced revenue of between $116 billion and $121 billion, which would correspond to an increase of between three and seven percent year-on-year. Amazon expects an operating profit of between minus one and plus three billion dollars – so there could well be red numbers.
The bottom line is that the group already suffered a loss of 3.8 billion dollars in the first quarter. But that was mainly due to a $7.6 billion value correction of Amazon’s stake in US electric car maker Rivian. Shares in Tesla’s rival fell more than 50 percent in the first quarter of 2022. That gave Amazon its first net quarterly loss since 2015. A year ago, the e-commerce boom sparked by the pandemic gave the company a surplus of $8.1 billion.
But the Corona trend towards online shopping has long since died down – and Amazon is clearly feeling the effects. The only ray of hope in the most recent quarter was the cloud business with storage space and applications on the Internet, which is still thriving. Its flagship AWS increased revenue by 37 percent to $18.4 billion. The operating profit of the cloud platform climbed by around 55 percent to $6.5 billion. AWS thus further strengthens its status as the company’s most important profit generator. (dpa)