Amazon reported its second consecutive quarterly loss on Thursday, but its revenue beat Wall Street expectations, sending its shares sharply higher.
The Seattle-based e-commerce giant also said it is making progress in reining in some of the cost overruns from its massive expansion during the COVID-19 pandemic.
Amazon lost $2.03 billion, or 20 cents a share, in the three-month period ended June 30, fueled by a $3.9 billion writedown of the value of its stock investment in electric vehicle startup Rivian Automotive. .
That compares with a profit of $7.78 billion a year ago. It posted a $3.84 billion loss in the first quarter of this year, its first quarterly loss since 2015, which was also marked by a large write-down from Rivian. Analysts had expected a profit of 12 cents in the latest quarter, according to FactSet.
But Wall Street was buoyed by Amazon’s $121.2 billion in revenue, beating expectations of $119 billion. The results came as the company tries to navigate changing consumer demand and higher costs while cutting back on excess warehouses it acquired during the COVID-19 pandemic.
Shares of Amazon.com Inc. rose nearly 14% in after-hours trading.
CEO Andy Jassy said in a statement that Amazon is seeing its revenue accelerate as it invests in its Prime membership and offers more benefits to members, such as its recent deal to provide free access to Grubhub meal delivery service for a year.
Subscription services have grown 10% compared to the previous year. Some analysts estimate that the company generated about $4.6 billion in revenue during its Prime Day shopping event, which it held during the second quarter of last year but moved into the third in 2022. Amazon noted that sales have also been affected by the exchange rate fluctuations.
“In this context, Amazon’s performance is reasonable enough, but it’s still a long way from the stellar numbers that Amazon typically produces,” said Neil Saunders, CEO of GlobalData.
Jassy said the company continues to feel inflationary pressure from higher energy and transportation costs, but has been making progress in controlling expenses related to its distribution network.
Between 2019 and 2021, Amazon nearly doubled the number of warehouses and data centers it leased and owned to keep up with growing consumer demand. But as consumers changed their habits, Amazon found itself with too many workers and too much space, adding billions in additional costs. The company has been subletting some of its warehouses, canceling some of its leases and delaying the construction of others to fix the problem.
Amazon Chief Financial Officer Brian Olsavsky said during a press conference Thursday that the company is slowing its expansion plans for this year and next to better align with customer demand. He said the company also plans to shift capital investments to its AWS cloud computing unit.
Amazon’s retail operations, both internationally and in North America, reported operating losses, showing the company is suffering the same fate as Walmart and Target, Saunders said. Costs are outpacing sales and growth, though Amazon can turn to other profit pools, such as AWS, to protect its overall performance, he said.
AWS, facing increasing competition from Microsoft Azure, had $19.74 billion in revenue, a 33% increase from last year. While Amazon’s advertising unit, another burgeoning moneymaker, brought in $8.76 billion, an 18% increase from last year.
On the labor side, Amazon has been able to reduce its headcount through attrition and staffing levels were more in line with demand, Olsavsky said. The company had 1.52 million employees at the end of June, down 6.1% from the first quarter. The performance of the broader economy is expected to shape your hiring plans going forward.
“I don’t think you’ll see us hiring at the same rate that we have over the last year, or the last few years,” Olsavsky said, adding that the company will continue to hire for specific positions for profitable units, such as its advertising business. and AWS.
Despite Wall Street’s celebration, the e-commerce and tech giant’s revenue growth was still at a relatively slow 7%, about the same as the first quarter of this year and the slowest in about two decades. It comes as the pandemic-induced consumer reliance on online shopping fades and Americans are shifting their spending habits from things like home improvements to travel and dining out.
Consumers and businesses are also feeling the brunt of rising inflation, which is at its highest level in 40 years. Faced with rising food and gas costs, Americans have cut back on purchases of discretionary items, forcing Walmart, Target and other retailers with extra inventory to offer deeper discounts on items like electronics. Although Olsavsky said that inflation has not cooled demand.
“We saw an increase in demand during the quarter and we had a very strong June,” he said.
Olsavsky also noted that third-party sellers accounted for 57% of total units sold on Amazon during the quarter, the highest in company history.
Amazon expects to post between $125 billion and $130 billion in revenue for the third quarter, a growth of 13% to 17% compared to the same period a year ago. Analysts expect $126.49 billion, according to FactSet.