Faced with a pandemic that appears to be receding and the highest levels of inflation in four decades, Amazon on Thursday posted its slowest quarterly growth in years and its first quarterly loss since 2015.
The company reported $116.4 billion in revenue in the first three months of the year, up 7% from a year earlier. This is down from the 44% growth in Q1 2021. The number of products Amazon sold in the quarter was flat from a year earlier, and its costs to sell those items also increased.
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 whose shares have tumbled this year. Losses also resulted from Amazon’s consumer business in North America and internationally, although its cloud services division continued to grow and make money.
The results fell far short of Wall Street’s expectations, causing Amazon’s stock price to tumble more than 10 percent in after-hours trading.
“Our teams are fully focused on improving productivity and cost efficiency across our entire service network,” said Andy Jassy, the company’s chief executive, in a statement. “We know how to do it and we’ve done it before. This can take some time, particularly as we work with ongoing inflation and supply chain pressures.”
The company’s forecasts for the current quarter of a 3% to 7% increase in sales indicate that its growth may continue to slow.
Amazon benefited from the coronavirus pandemic as people flocked to shop online. But as vaccines spread and inflation hit 8.5% in March, behaviors shifted again. According to Commerce Department data released on Thursday, consumer spending on the types of non-durables people typically buy on Amazon dropped 0.6% in the first quarter compared with the last three months of 2021, when adjusted for inflation.
Brian Olsavsky, the head of finance, said in a call with reporters that the company was “very happy” with the frequency with which customers shopped on Amazon and that part of the slowdown reflected the end of pandemic shopping habits. Customers made more frequent, low-cost purchases like masks a year ago and are now returning to regular buying patterns, he said.
Amazon also faced rising costs, with operating expenses for its North American consumer business up 16%, even as sales in the region grew by just 8% in the quarter. Inflationary expenses added $2 billion in costs, Olsavsky said, adding that “we expect them to remain for some time.”
Another $4 billion in costs was due to the inefficient operation, he said. Amazon has spent big to hire and double the size of its storage infrastructure over the past two years, including opening nationwide delivery depots that allow its network of contractors to quickly get packages to people’s doors.
Olsavsky said the company is pulling back on some of its expansion plans so it can more efficiently maximize the spaces it currently has.
“We have a lot of space now in terms of our demand patterns,” he said. Without the unpredictable surges in demand driven by the virus, he said, “we can increase our capacity.”
At one point in mid-March, Amazon forced employees at several warehouses to take mandatory time off without pay because customer demand was weak.
In response to rising costs, Amazon has raised prices for customers and sellers in its marketplace. The price of its Prime subscription program rose in February to $139 from $119, the first increase since 2018. This month, the company announced an additional “fuel and inflation” fee for sellers whose inventory stores and delivers to customers. customers.
The labor shortage has also cost Amazon billions of dollars recently, as it has responded by raising wages and offering other incentives. The company barely grew its workforce during the quarter, with a total of 1.62 million employees.
The company faced a wave of labor activism. In April, workers at a Staten Island warehouse voted to be the first Amazon facility in North America to unionize.
Amazon also had positives in its business. Amazon Web Services, its cloud computing business, grew 37% in the quarter to $18.4 billion in sales.