Amazon Reporting Heavy Losses Due To Increasing Fuel Prices And Supply Chain Disruptions
The e-commerce behemoth’s online sales fell 3% in the first three months of the year, as the pandemic’s boost to its business begins to fade.
Meanwhile, Apple has warned that interruptions in China may cost the company up to $8 billion.
Both companies are dealing with supply chain challenges as well as the effects of the Ukraine conflict.
Other elements of Amazon’s business, such as cloud computing and advertising, continued to grow rapidly.
The corporation reported a $3.8 billion loss, mostly due to a $7.6 billion loss on the value of its Rivian holding.
Rivian is owned by Amazon, which invested in the company in 2019 with plans for an electric delivery fleet. Amazon owns a nearly 20% stake in the company. However, as the firm struggles to ramp up production, the stock price of the electric vehicle maker has more than halved since the beginning of the year.
Overall, Amazon expects sales to climb by as little as 3% in the next months, a significant decrease from the double-digit growth it has experienced in previous years, even before the pandemic.
Amazon chief executive Andy Jassy said, “The pandemic and subsequent war in Ukraine have brought unusual growth and challenges.”
He also mentioned that the corporation was dealing with rising prices as a result of “ongoing inflationary and supply chain pressures”.
As trading began in the United States on Friday, Amazon’s stock plunged 12%.
The company’s overall sales increased by 7% year over year to $116.4 billion, thanks to Amazon Web Services (AWS), the company’s cloud-computing business and consistent profit generator.
Revenues from AWS increased 37% year over year, while advertising revenue increased by 23%.
However, growth slowed significantly elsewhere, particularly in its overseas sector, where sales fell 6%.
Expenses are also rapidly increasing, with inflation adding $2 billion to costs in the first quarter.
In the face of labor shortages, the corporation has raised wages to attract workers, and it is also facing a growing push in the United States to allow workers to form unions.
Meanwhile, the rising gasoline process has increased the cost of delivery.
Amazon has previously announced that the price of its Prime membership, which provides subscribers with privileges such as faster shipping, will be hiked for US users, citing rising salary and shipping expenses.
Sales increased by 9% to $97.3 billion in the second quarter, while profits increased by more than 10% to $25 billion.
In a conference call with analysts, management was less upbeat, noting a “challenging macroeconomic environment”.
Due to interruptions in global supply networks, the company predicted a $4 billion to $8 billion drop in sales in the three months ending in June.
Tim Cook said, “We are not immune to these challenges but we have great confidence in our teams, in our products and service, and in our strategy.”
Apple and Amazon are far from the only IT behemoths encountering difficulties.
Facebook owner Meta posted its worst revenue in a decade earlier this week.
Netflix also announced last week that its revenue growth has slowed significantly.
I am Darryl Broadhurst and i give investors an insight into the most recent news hitting the “Technology” sector in Wall Street. I have been an independent financial adviser for over 11 years in the city and in recent years turned my experience in finance and passion for journalism into a full time role. I perform analysis of Companies and publicizes valuable information for shareholder community.
