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Amazon Could Report Loss in Q2 As a Result of COVID-19-related Costs

Amazon Could Report Loss in Q2 As a Result of COVID-19-related Costs

Enterprise & IT May 1,2020 0

Amazon.com Inc on Thursday said it could post its first quarterly loss in five years even as revenue surges because it is spending at least $4 billion in response to the coronavirus pandemic, including plans to test its workforce for COVID-19.

Jeff Bezos, the company’s founder and world’s richest person, said in a statement, “we’re not thinking small,” a sign that the e-commerce company would invest heavily during the pandemic. Rival brick-and-mortar retailers have had to shut stores while Amazon hired 175,000 people.

This quarter, Amazon said it could see a 28% rise in revenue to $81 billion. The Seattle retailer forecast operating income will range from a loss of $1.5 billion to a profit of $1.5 billion, versus earnings of $3.1 billion in the same period a year prior.

At the same time, the virus has infected workers at dozens of locations, igniting small protests and prompting labor organizers to demand site closures. Amazon has rolled out masks and temperature checks to all its U.S. and European warehouses, announced software to monitor for social distancing and taken other measures to ensure it stays operational.

Revenue for the first quarter rose 26% to $75.5 billion, beating average estimate of $73.6 billion.

Grocery sales in March were a bright spot for Amazon, which owns Whole Foods Market, Chief Financial Officer Brian Olsavsky said on a call with analysts. Household staples and home office supplies have been in high demand, while interest in discretionary items like apparel dipped, he said.

Last month, the number of people who streamed video on Amazon for the first time nearly doubled, Olsavsky said.

Subscription revenue grew 28% to $5.6 billion in the first quarter.

Still, advertising, a business in which merchants pay for top placement of their goods on Amazon, was somewhat of a “mixed bag,” Olsavsky said.

Merchants had less reason to sponsor products in March when the company paused accepting non-essential items into warehouses for delivery. Some pulled back on placing ads, the price of which went down; however, strong traffic to Amazon’s websites helped offset the trend, Olsavsky said.

Advertising and other revenue was up 44% in the first quarter to $3.9 billion.

Amazon Web Services (AWS), the company’s cloud computing unit, also is seeing demand vary by industry. Remote education and entertainment services had much higher AWS usage, and overall, revenue increased 33% to $10.2 billion, short of analysts’ estimate of $10.3 billion.

Amazon expects to spend $300 million in the second quarter to develop the capability to test staff for the virus, Olsavsky said. That could approach $1 billion for the full year if the early effort is successful, with the goal of “making testing widely available,” he told reporters earlier on Thursday.

Total operating expenses rose 29% in the first quarter to $71.5 billion.

Tags: Amazonfinance
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