Amazon unveiled its financial results for the first quarter of 2022, running from January to March, and they are not very good. The e-commerce giant has indeed recorded its first quarterly loss since 2015.
Post-pandemic return to normal life affects e-commerce
Overall, the company reported a net loss of $3.8 billion for the quarter, compared to net profit of $8.1 billion in the same period last year. While Amazon’s revenues still increased by 7%, this figure is clearly low; it’s the company’s slowest rise in two decades. For example, this increase was 44% in 2021.
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Operating profit meanwhile was $3.7 billion, compared to $8.9 billion in the first quarter of 2021.” The pandemic and subsequent war in Ukraine have brought unusual growth and challenges. Today, when we are no longer looking for physical capacity or staffing, our teams are focused on improving productivity and cost efficiencies across our fulfillment network. We know how to do it and we have done it before. This may take some time, particularly as we work through ongoing inflationary and supply chain pressures, but we are seeing encouraging progress on a number of customer experience dimensions, including the performance of the speed of delivery, as we are now approaching levels not seen since the months immediately preceding the pandemic in early 2020 said Amazon CEO Andy Jassy.
In addition to price inflation, the firm is also affected by the return to normal life for consumers. Amazon has benefited greatly from the Covid-19 pandemic, but as people return to shopping in physical stores, the e-commerce sector is losing momentum. As a result, March 2022 was the first month since the start of the pandemic that online sales declined from a year earlier, according to Mastercard SpendingPulse, which tracks transactions made on the Mastercard payment network as well. than survey-based estimates for cash and checks.
To make up for the losses, Amazon raised the price of its Prime subscription in the United States from $119 to $139 per year, and also introduced a “ surcharge for fuel and inflation which averages 5% of the fulfillment fee it charges sellers who use its services.
The e-commerce sector is losing momentum as consumers gradually return to physical stores to shop. Photography :
Marks Thomas @querysprout.com / Unsplash
Big announcements for Amazon
However, Amazon can still rely on its cloud division, Amazon Web Services (AWS), whose sales rose about 37% in the first quarter to $18.4 billion. AWS remains the world’s leading cloud provider ahead of Microsoft and Google. Its branch dedicated to advertising also recorded encouraging results with 7.87 billion dollars in sales for the first quarter, an increase of 23% compared to the previous year.
The first quarter of 2022 also saw many new releases and announcements emerge for Amazon, as Andy Jassy clarified in his statement. The company has indeed announced the launch of Buy with Prime, a service allowing merchants to exploit all the logistics infrastructure put in place by Amazon for its Prime service, and has also completed the acquisition of MGM Studios. This will allow it to greatly expand the Amazon Prime Video catalog and become an even more credible competitor against the giants such as Netflix or Disney+.
In addition, the company has signed astronomical contracts with Arianespace, Blue Origin and United Launch Alliance for a total of 83 launches as part of its Kuiper project, which should compete with Elon Musk’s constellation of satellites, Starlink.
Amazon’s second quarter doesn’t look any better
Amazon’s predictions for the second quarter of 2022 aren’t exactly promising. The company expects its growth to plunge even further, between a loss of $1 billion and a profit of $3 billion. In the same period of 2021, it posted an operating profit of $7.7 billion.
Amazon has also announced that its famous Prime Day, which often helps boost its profits, will be held in July and not in June as usual. The two-day event could potentially hurt year-over-year comparisons for second-quarter revenue, while boosting third-quarter results, notes CNBC.
The e-commerce giant must also face a vast movement of unionization on the part of its employees, with in particular a New York warehouse which has chosen to join a large American union, and a second which should decide this week. If the firm is against the unionization of its employees, it would seem that it has no choice but to keep a low profile in the face of their demands.
Finally, its stake in electric vehicle company Rivian also contributed to lower profits: while the manufacturer had a remarkable IPO in 2021, its shares lost more than half of their value during the quarter, Amazon recorded a loss of $7.6 billion on its investment.