Zhi DongXi (public number: zhidxcom)
Author | Li Shuiqing
Edit | Heart edge
Today, the US e-commerce giant Amazon released its first quarter 2022 financial report, showing that it lost $3.8 billion this quarter, which is its first fiscal quarter loss since 2015. Although revenue grew 7 percent to $108.5 billion, it was also Amazon's slowest pace in 20 years.
However, the growth of Amazon's cloud business (AWS) was very impressive, with net profit increasing by nearly 57% year-on-year to $6.52 billion, thus filling Amazon's large deficit in the first quarter.
As overall performance fell well below Wall Street expectations, its after-hours trading fell more than 10 percent.
First, the quarterly revenue growth rate is a 20-year low, and the investment car companies lose 7.6 billion US dollars
Amazon's first-quarter revenue was $116.444 billion, up 7 percent from $108.518 billion in the previous year. While growing steadily, it's well below the previous year's 44 percent, which is also known to be its lowest quarterly growth rate since 2001.
Amazon lost $3.8 billion in the quarter, including a $7.6 billion drop in the value of its investment in Rivian Automotive, an electric truck maker that fell this year. The electric car company's stock price fell more than half this quarter, which led to Amazon losing $7.6 billion that quarter.
The loss also stemmed from Amazon's consumer business in North America and internationally, and although its cloud services division continued to grow and earned Amazon $6.52 billion, it did not reverse the trend.
By geography, the North American segment also performed better. Amazon's North America division (U.S., Canada) had first-quarter revenue of $69,244 million, up 8% year-over-year, accounting for 59% of total revenue; Amazon's international division (U.K., Germany, France, Japan, and China) had quarterly revenue of $28.759 billion, down 6% year-over-year, accounting for 25% of total revenue. Amazon excluded AWS cloud services from the e-commerce business, with first-quarter revenue of $18.441 billion, up 37% year-over-year and 16% of total revenue.
Amazon expects its fiscal second quarter 2022 revenue to be between $116 billion and $121 billion, up 3% to 7% year-over-year.
AWS nets $6.5 billion for Amazon, with a profit margin of 35.3%
Amazon's business also has bright spots. Its cloud computing business, AWS, saw revenue rise 37 percent to $18.4 billion in the quarter, or about 16 percent of Amazon's total revenue, up from $18.27 billion widely believed by analysts surveyed by StreetAccount.
The performance report of the cloud business shows that the demand for compute, storage, and database services provided by remote server farms is light, but still active. Amazon Web Services's revenue growth slowed from 39.5 percent in the fourth quarter of last year.
For Amazon, cloud computing is more than just another rapidly expanding business. At Amazon, the cloud means more profit. AWS's net profit for the first quarter was $6.52 billion, up nearly 57 percent, above StreetAccount's consensus of $5.62 billion.
Amazon's net profit for the quarter was -3.67 billion, which means that without a profitable AWS, the entire business would lose more money.
It is worth mentioning that AWS's operating margin expanded to 35.3% from 29.8% in the fourth quarter.
Amazon launched AWS in 2006, before Microsoft Azure and Google Cloud Platform. In the quarter, Amazon's AWS revenue was still higher than Microsoft Azure's $11.45 billion and Google Cloud's $5.821 billion. AWS said this quarter that Stellantis, a former fiat Chrysler automaker, will leverage its cloud services for in-vehicle dashboard software, while electronics retailer Best Buy will use more AWS tools.
Inflation and the Russo-Ukrainian war affected Amazon's performance
As Google and Facebook said earlier this week, Amazon blamed the slowdown in growth largely on macroeconomic conditions and the outbreak of the Russian-Ukrainian conflict.
Amazon CEO Andy Jassy said in a statement: "The outbreak of the pandemic and the Russian-Ukrainian conflict has brought unusual growth and challenges. ”
"Our team is fully focused on improving the productivity and cost efficiency of the entire logistics network." Andy Jassy said in a statement, "We know how to do this and have done it before. This may take some time, especially as we deal with ongoing inflation and supply chain pressures. ”
Jassy admits that Amazon faces a series of economic pressures such as inflation and supply chain pressures.
As people flock to shop online, Amazon has benefited from the coronavirus pandemic. But with the vaccine becoming widely available and inflation reaching 8.5% in March, people's behavior has changed again. Adjusted for inflation, consumer spending on non-durable products that people regularly buy on Amazon fell 0.6 percent in the first quarter compared to the last three months of 2021, according to data released Thursday by the Commerce Department.
Treasurer Brian Olsavsky said inflation spending added $2 billion in costs, adding that "we expect them to continue for some time."
Amazon also faced rising costs, with operating expenses for its North American consumer business up 16 percent, even as revenue in the region grew by only 8 percent in the quarter.
Olsavsky said the additional $4 billion in costs are due to operational inefficiencies. Over the past two years, Amazon has spent a fortune hiring and scaling up its warehousing infrastructure, including opening delivery stations across the country to get packages to people's doorsteps quickly through its network of contractors. The company is withdrawing some of its expansion plans.
Labor shortages have also recently cost Amazon several billion dollars as it responds by raising wages and offering other incentives. The company barely increased its headcount during the quarter, with a total of 1.62 million employees. Sometime in mid-March, Amazon forced employees in multiple warehouses to take unpaid leave due to weak customer demand.
In response to rising costs, Amazon has raised prices for customers and sellers on its marketplace.
Amazon charged some U.S. sellers for the first time in its history this month for a 5 percent "fuel and inflation" surcharge and raised the price of U.S. Prime memberships from $119 to $139 last quarter, the first increase since 2018.
Conclusion: Amazon's growth rate has slowed down, and the cloud business has provoked a way to make money
In recent years, investors have grown accustomed to Amazon's rocket-like growth trajectory during the pandemic and haven't fully adapted to the fact that it no longer accelerates so fast.
With the release of Amazon's financial report in the first quarter of 2022, on the one hand, we see that its e-commerce business has slowed down with the liberalization of anti-epidemic policies; on the other hand, cloud computing is becoming a more critical money-making business for Amazon.
Source: CNBC, The New York Times