Even mega-cap tech giant Amazon couldn’t weather the macroeconomic headwinds that threatened corporate America last quarter.
Amazon (AMZN) shares plunged 14% on Friday, the retail giant’s biggest intraday drop since July 2006, according to Bloomberg data.
The selloff follows a disappointing earnings report from Amazon, which reported a loss of nearly $4 billion for the three months ended March 31 — the company’s first quarterly loss in seven years — largely due to its investment in the electric vehicle maker This is due to Rivian Automotive (RIVN), whose shares have fallen more than 75% since going public late last year.
In the same quarter last year, Amazon posted an $8.1 billion profit as its core retail business benefited from a pandemic-driven surge in online shopping.
On the revenue side, Amazon’s net sales posted the slowest pace of growth in about two decades, up 7% to $116.4 billion, compared with a 44% pace in the same period last year.
“Amazon is still a titan, no one can deny that — $116 billion in quarterly sales needs a mighty beast,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, in an emailed note. “Unfortunately, however, the market is not oversleeping the fact that Amazon is suffering greatly from economies of scale.”
Of even greater concern for investors was a disappointing outlook for the current quarter, which missed analysts’ estimates. Amazon forecast second-quarter sales of between $116 billion and $121 billion for the period ended June 30, citing higher transportation costs related to ongoing supply chain and inflationary pressures, as well as increased labor costs from expanding staff to meet higher pandemic demand . Bloomberg analysts were expecting net sales of $125.01 billion, according to consensus data.
The company also warned that revenue growth could decline further to a rate between 3% and 7% in the next quarter.
“The pandemic and subsequent war in Ukraine has brought unusual growth and challenges,” Amazon CEO Andy Jassy said in a statement. “No longer looking for physical or human capacity, our teams are fully focused on improving productivity and cost efficiencies across our fulfillment network.”
The story goes on
A fast-moving conveyor moves a package through a scanning machine en route to a delivery truck during Cyber Monday operations at Amazon’s fulfillment center in Robbinsville, New Jersey, U.S. November 29, 2021. REUTERS/Mike Segar TPX IMAGES OF THE DAY
Despite a challenging quarter, analysts remain optimistic about Amazon’s scope for recovery.
“There were a lot of downsides, but there were also bright spots during the quarter,” Cowen senior analyst John Blackledge told Yahoo Finance Live on Friday, noting an acceleration in delivery times, an easing of compensation and the end of a challenging part of the year quarterly investment cycle.
Bank of America analysts also pointed out that spot freight costs are already falling, which should help with some of Amazon’s named costs of inflation, and staff headcount may be addressed through attrition and limited hiring in the second half of the quarter. Also providing tailwinds will be Amazon’s recently announced 5% fuel and inflation surcharge, as well as the likelihood for the retail industry to raise prices to reflect higher costs over time, BofA said.
Though overshadowed by disappointing results, revenue from the company’s high-margin cloud computing business, AWS, remains upbeat. AWS revenue grew 36.7% year over year to $18.44 billion, the company announced on Wednesday.
“Amazon is well-positioned to withstand cost pressures with greater efficiency than most of its competitors (and a large AWS profit pool), and the retail industry will ultimately pass higher costs on to consumers,” BofA said in a statement Friday.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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