Amazon’s financial report shows: Affected by inflation, labor, supply chain and Rivian’s stock price slump in the first quarter, Amazon’s first-quarter net sales of $116.40 billion were lower than analysts’ expectations of $116.43 billion, a year-on-year increase of 7.3%, the slowest in two decades. speed up. Among them, Amazon’s AWS cloud computing service net sales growth of 37% was the only bright spot in this fiscal quarter, but compared with 39.5% in the previous quarter, there are also signs of slowdown. Its second-quarter revenue is expected to be between $116 billion and $121 billion, also missing analysts’ estimates of $125.5 billion. It fell 10% in after-hours trading.
On Thursday, April 28, Eastern Time, after the US stock market closed, the global e-commerce giant Amazon released its first quarter 2022 financial report. Compared to last quarter’s unsatisfactory performance – the most “weak” growth in 20 years, but investors see stickiness and build confidence in future growth recovery, not only soared after the market, but also hit the biggest since 2015 the next day single-day increase. However, this earnings season, Amazon was not so lucky, because its revenue fell short of analysts’ expectations, Amazon’s US stock market plunged 10.4% after the market.
Amazon’s U.S. stock market closed up 4.65% on Thursday, down more than 15% year-to-date.
Specifically, its core financial indicators:
EPS lost $7.56 per share in the first quarter, compared with analysts’ expectations for earnings per share of $8.40.
Net sales in the first quarter were $116.40 billion, lower than analysts’ expectations of $116.43 billion, up 7.3% year-on-year, the slowest growth rate in two decades. Among them, net sales in North America were US$69.24 billion, a year-on-year increase of 7.6%, higher than analysts’ expectations of US$67.8 billion; international net sales were US$28.76 billion, a year-on-year decrease of 6.2%, lower than expected US$29.78 billion.
Operating profit in the first quarter was $3.67 billion, down 59% year-on-year, and analysts expected $5.42 billion; operating profit margin fell to 3.2% from 8.2% a year ago, 4.7% lower than expected.
By business:
Net sales of online stores in the first quarter were US$51.13 billion, down 3.3% year-on-year, lower than analysts’ expectations of US$51.50 billion.
AWS net sales in the first quarter were $18.44 billion, up 37% year-over-year, beating analyst expectations of $18.25 billion.
Net sales of subscription services in the first quarter were $8.41 billion, up 11% year-over-year, missing analysts’ expectations of $8.55 billion.
Brick-and-mortar net sales in the first quarter were $4.59 billion, up 17% year-over-year and above expectations of $4.3 billion.
The advertising business recorded $7.88 billion in the first quarter, missing Wall Street expectations of $8.17 billion.
An investment in U.S. electric vehicle brand Rivian recorded a $7.6 billion loss in the first quarter as the company lost more than half of its market value in the quarter, with a net loss of $3.8 billion.
In addition, Amazon also gave a disappointing outlook for the second quarter of 2022 (including the assumption that a Prime Day event will be held in the third quarter of 2022.)
Second-quarter revenue is expected to be $116 billion to $121 billion, which is also lower than analysts’ forecast of $125.5 billion. According to its performance guidance data, the median value is $118.5 billion, and Amazon’s growth rate will hit a new low. 4.8%.
It is forecasting an operating loss of $1 billion to a profit of $3 billion in the second quarter, well below analysts’ expectations for a profit of $6.8 billion.
Amazon’s Challenges: Full-blown Inflation to Supply Chain Crisis, But Profits Still Hit
Commenting on the quarter’s performance, Amazon Chief Executive Andy Jassy said it is focusing on improving the efficiency of its warehouse and delivery network, which has expanded rapidly during the pandemic, but it will take some time. In addition, Amazon said it was struggling with inflation and supply chain pressures, and said the company was no longer pursuing physical or employee capacity.
The epidemic and the Russian-Ukrainian conflict have brought unusual growth and challenges. We “face up” to the cost of the fulfillment network, and now the staffing and warehousing capacity has reached normal levels.
The most notable thing about this financial report is its weak revenue. Revenue in the first quarter increased by 7.3%, which was its slowest growth in about 20 years. Combined with the median of its second-quarter revenue guidance, the next Quarterly growth will be just 4.8% or less. And that’s after Amazon’s move to “raise” Prime subscription prices last quarter.
Poonam Goyal, senior analyst at Bloomberg, said:
The margins in the online business are weak, you could say that’s surprising, but it’s actually not surprising. For online businesses, supply chain issues aren’t going away anytime soon.
In response to the difficulties, Amazon earlier this month imposed a 5% surcharge on some of its U.S. sellers, the first such fee in its history. And last quarter, Amazon raised the price of its U.S. Prime membership from $119 to $139 for the first time in four years.
However, its operating margin still took a hit, slipping from 8.2% a year ago to 3.2% in the first quarter. As Jassy put it:
(improving margins) It may take some time, especially as we address ongoing inflation and supply chain pressures, but we are seeing encouraging progress in some customer experience, including delivery speed performance, as we It is now approaching levels not seen since the months before the pandemic in early 2020.
AWS business is strong but growth rate is slowing, advertising business is not ideal, Rivian stock price is dragging its feet
Arguably, Amazon’s 37% increase in net sales of its AWS cloud computing services was the only bright spot in the quarter. Net sales rose to $18.44 billion ($13.5 billion a year ago versus $18.34 billion expected) even as Microsoft, Google and others scrambled for market share. Additionally, the segment’s operating income increased from $4.16 billion to $6.52 billion.
However, even Amazon’s star business AWS revenue growth, compared to the previous quarter’s 39.5%, there are times when the slowdown. It’s worth noting that while AWS’s margin actually rose to a record high of 35.35% (from 29.8% in Q4), it barely offset losses in the North American and International divisions, which generated a Operating losses of more than $1 billion.
In addition, as the latest company to report advertising revenue, Amazon’s advertising revenue is not satisfactory, although its 23% year-on-year growth rate is better than that of other technology companies. Google’s ad revenue rose 22% in the quarter, but it was slowed by YouTube, recording 14% growth, missing expectations. Facebook’s ad revenue rose just 6.1%, its weakest expansion in its 10-year listing.
Rivian, who brought Amazon glory last quarter, fell in this quarter. Last quarter, the far-beating profit came from Amazon’s huge return on investment in “Tesla rival” Rivian. Rivian, the first manufacturer of electric pickup trucks in the United States, listed on Nasdaq in November, with an offering price of $78 and a financing scale of $12 billion. On the first day of the IPO, it opened about 35% higher, and then its market value surpassed that of General Motors and Volkswagen. Automobile, once ranked the third largest automaker in the world. Before the IPO, Amazon’s stake in Rivian was as high as 20% (the holding value was $3.8 billion). Although it has experienced a peak price of $172 and has fallen back to the current level of $60, Amazon is still making excess profits in the return on investment.
With the first quarter of this year, Rivian’s shares fell about 52%, costing Amazon a $7.6 billion loss in the value of its Rivian stake. And Ford, another major shareholder behind Rivian, also suffered heavy losses in the first-quarter earnings report announced today, from $10.6 billion to $5.1 billion.
Other “difficulties”: retaining employees
In addition to the aforementioned inflation, it further exposes the problems of Amazon’s low-margin e-commerce model, because this model has created dependence and inertia for users to expect low prices and fast delivery. Another headache for Amazon is employee retention. Since Amazon’s salary is largely tied to its stock price, it will also become a fuse if investors lose confidence and sell the stock.
Not long ago, Amazon employees in Staten Island, New York City, voted to form a union with a 55% approval rate. This move by Amazon employees has been described by many American media as a “pioneering move”, “amazing victory” and “major victory”. Proponents argue that working together can get better wages and time off. But Amazon is clearly dissatisfied with this. An Amazon spokeswoman said the company was “disappointed” with the results of the vote, was evaluating the vote, and believed that a direct connection between employees and the company was the best way.
Amazon’s sales have grown from $281 billion in 2019 before the outbreak to $470 billion in 2021. Profits soared to $33.4 billion from $11.6 billion in the same period. In contrast, however, employee treatment, including work standards, has been questioned. For example, in December, a tornado hit Edwardsville, Illinois, collapsing an Amazon warehouse and killing six people. Reports suggest that the tragedy was related to Amazon not allowing workers to leave the warehouse. In addition, the practice of ignoring employee complaints or offering unsatisfactory solutions provides more opportunities for unions, environmental groups and other professional organizers to gain support.
