Amazon shares rise despite below-expectations quarterly result
The world's largest online retailer, Amazon, released
its second-quarter earnings on Thursday. Amid inflation and a $2 billion net
loss, the results were notably better than anticipated. The loss is mostly
attributed to Amazon's ownership of Rivian. The second quarter's net loss is
contrasted with Q2 2021's second quarter's net income of $7.8 billion.
Sales in the second quarter climbed by 7% to $121.2
billion from $113.1 billion in the corresponding time of 2021. This was higher
than the $119.3 billion prediction made by Wall Street. For the quarter, the
company expected revenue of between $116 billion and $121 billion.
The marginally positive news caused Amazon shares to
rise 11% in after market close trading on Thursday.
Sales from online stores decreased by 4.3% to $50.89
billion. Wall Street only predicted a 2% fall, roughly.
Overall, Amazon's stock is down 32% year to date,
primarily as a result of a string of underwhelming quarterly reports. Amazon
reported a $3.84 billion deficit for the first quarter at the end of April. In
addition to the results falling short of Wall Street's expectations, the
stock's subsequent 14% decline was the biggest one-day decline in 16 years.
The CEO of Amazon, Andy Jassy, stated in the company's
earnings report that despite persistent challenges in fuel, electricity, and
transportation costs, "we're making progress on the more controllable
costs we referenced last quarter", including enhancing the productivity of
the company's fulfillment network.
After nearly growing exponentially during the
epidemic, Amazon cut its staff by 99,000 workers to 1.52 million jobs by the
end of the second quarter.
In the wake of the current economic crisis, IT firms
have been reporting layoffs, hiring suspensions, and the cancellation of employment
offers. However, Amazon will continue to hire engineers for departments
like the Amazon Web Services, but will be careful about hiring in other
areas, according to CFO Brian Olsavsky during a conference call with reporters.
Amazon suffered a $3.9 billion loss on its investment
in Rivian after shares of the EV maker's shares fell by 49%. Its overall loss
on the investment for the year now stands at $11.5 billion.
The ecommerce giant lost $2 billion in the quarter
altogether as a result of the Rivian writedown, according to CNBC.
Due to the fact that online sales are no more booming
as they were at the peak of the Covid-19 pandemic, Amazon's main e-commerce
business continues to struggle. The company's online store division saw a 4%
year over year fall. Sales in physical stores increased by 12 percent over the
same time last year.
Amazon's cloud business is still doing well. Sales at
Amazon Web Services increased 33 percent year over year to $19.74 billion,
exceeding Wall Street's $19.56 billion forecast.
Operating income, which does not include the loss on
investments, decreased from $7.7 billion to $3.3 billion from the prior year.
AWS produced operational income of $5.7 billion, which is equivalent to all of
Amazon's earnings for the time period plus some.
The positive outcomes might also lift Jassy's spirits,
who took over as CEO from Jeff Bezos a little more than a year ago. Challenges
like a protracted labor dispute, the market slump, increasing regulatory
pressure, and the exit of top talent have marred Jassy's first year
on the job.
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