Amazon shocks with billions in losses: the share drops by ten percent

New York Investors weren’t expecting this: Amazon posted a loss of $ 3.8 billion in the first quarter of the year. The reason for this, in addition to the weakening of online commerce, was mainly the devaluation of the stake in Rivian, which amounted to 7.6 billion dollars.

Shares of the electric car maker lost enormously in value in the first quarter.

Data released after close of trading caused the share price to drop by more than ten percent after the stock had previously gained 4.6 percent.

It is mainly the disappointing outlook that worries investors. Amazon warns that inflation will continue to weigh on the company. Inflation caused an additional $ 2 billion in costs in the first quarter, CFO Brian Olsavsky said. And inflationary pressures will not subside anytime soon.

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Amazon share: Sales increase by 9%.

Without the Rivian devaluation, the result would have been negative, but significantly lower than a year ago: in the first quarter, operating profit fell to $ 3.7 billion after the $ 8.9 billion in the same period last year. last year, the group said Thursday with. Sales after currency, on the other hand, increased 9% to $ 116.4 billion.

Classic online trading posted losses in the first quarter, which could only be offset by the increasingly important cloud business of Amazon Web Services (AWS).

AWS compensates for the loss in online trading

For some time the online retailer has been transforming more and more into a technology, advertising and platform company. Amazon now makes most of its money with AWS and advertising anyway.

The fact that Amazon founder Jeff Bezos has chosen former AWS boss Andy Jassy as his number one successor clearly shows the importance of the division. In the first quarter, AWS contributed just under 16% to sales of $ 18.4 billion. But with a profit of $ 6.5 billion, the division was able to offset the losses in the other business.

Last year, the cloud division generated more than three-quarters of the profits for the full year, although it only brought 13% of sales to $ 62.2 billion. The major advertising business, which Amazon has only reported individually since this year, increased its currency-adjusted sales in the first quarter by a quarter to $ 7.9 billion.

Amazon with a cautious view

For the current quarter, Amazon is reluctant in view of the global economic slowdown and fierce competition in the increasingly important cloud business and expects revenues of between $ 116 billion and $ 121 billion.

Recently, Amazon has also felt opposed by its employees. For example, in a warehouse in the Staten Island borough of New York, workers voted to form a union for the first time in Amazon’s history.

And recently there has been a resistance to payment among employees as well. In February, Amazon raised the maximum fixed salary for its technical and administrative staff from $ 160,000 to $ 350,000 annually in the face of a hit job market and high inflation.

Amazon Shares: Analysts continue to expect growth

Despite recent setbacks, Seymour Asset Management’s Tim Seymor believes in the medium-term title: “I believe Amazon will remain a beast,” he told US television channel CNBS. But investors should get used to the fact that growth rates can no longer be as high as during the pandemic.

Amazon will be hit harder by the economy than other tech companies, agrees Gene Munster of Loup Funds. However, he expects stocks to strengthen over the next year.

Moreover: Microsoft continues to benefit from its Azure cloud technology. However, investors were initially frightened by the figures presented.

This article first appeared on April 28, 2022 at 10:23 pm.

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