What happened
Amazon.com’s stock price (AMZN -14.05%) fell 14% on Friday as fears of a slowdown in online titanium retail growth and rising costs prompted many investors to sell their shares.
And what
Amazon’s revenue grew 7% year-over-year to $ 116.4 billion in the first quarter. This is lower than the 9% growth in the fourth quarter of 2021 and a staggering 44% increase over the previous year.
Amazon’s pace of expansion has slowed as the economy reopened. The removal of restrictions on coronavirus in the United States and many other countries means that more people are shopping in traditional stores again. The growth of e-commerce, in turn, has slowed. Online retail sales in the United States fell 3.3 percent year on year in March, according to digital payments leader Mastercard.
People go back to the shops and shop less online. Image source: Getty Images.
At the same time, inflation and supply chain disruptions are increasing Amazon’s costs. Amazon is raising wages to attract and retain enough workers amid a tight labor market. Rising energy prices and supply are also reducing its profitability.
These challenges contributed to more than a 58% drop in Amazon’s operating revenue to $ 3.7 billion.
Now what
Amazon’s growth is likely to slow further in the second quarter. Management expects revenue to increase by 3% and 7% during the year to between 116 and 121 billion dollars. The company also warned investors that it could generate an operating loss of up to $ 1 billion as it struggles with cost pressures.
However, there were highlights in the Amazon report. Most of all, Amazon Web Services continues to grow with an impressive video. AWS revenue jumped 37% to $ 18.4 billion, while operating profit rose 57% to $ 6.5 billion. The huge computing infrastructure should help fuel Amazon’s long-term expansion as companies move more of their operations online in the coming years.
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