Amazon Swings to Loss in Q1, Sales Growth Slows and Ad Revenue Misses Expectations

Amazon dramatically missed Wall Street’s earnings forecast for the first quarter of 2022, as the world’s biggest online retailer saw a significant deceleration in top-line growth and faced higher costs in the period.

Overall, the company posted revenue $116.4 billion, up 7%, in line with expectations — but Amazon’s slowest year-over-year growth rate in two decades. Amazon reported a net loss of $3.8 billion in the first quarter, or -$7.56 per diluted share. The Q1 net loss included a pre-tax valuation loss of $7.6 billion included in non-operating expense from its stock investment in Rivian.

The ecommerce kingpin’s advertising service sales hit $7.88 billion, up 25%, but analysts expected a higher take. The company first broke out ad revenue with Q4 results. The segment includes sales of advertising services to sellers, vendors, publishers, authors and others through sponsored ads, display and video advertising.

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Analyst consensus estimates were for revenue of $116.3 billion and earnings per share of $8.36, according to Refinitiv. Wall Street was looking for $8.17 billion on ad sales, according to StreetAccount.

“The pandemic and subsequent war in Ukraine have brought unusual growth and challenges,” Amazon CEO Andy Jassy said in a statement. He noted that the company’s consumer business has grown 23% annually over the past two years, pointing to tough year-over-year comparisons.

“Today, as we’re no longer chasing physical or staffing capacity, our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network,” Jassy said, adding that “This may take some time, particularly as we work through ongoing inflationary and supply chain pressures.”

In February, Amazon announced a rate hike for its Prime membership program in the U.S., from $119 to $139 per year (up 17%), citing benefits including a stepped-up investment in “high-quality digital entertainment.” That, according to the company, included a tripling of TV shows and movies introduced on Prime Video since 2018 as well as rising wages and transportation costs.

More to come.

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