Amazon Stock Leaves Investors Shocked: Here’s What Happened

Amazon’s first-quarter earnings report, made available earlier Thursday, showed revenue and profits beyond expectations. But later in the evening, stock prices declined due to concerns over a possible slowdown in the lucrative cloud computing unit of Amazon Web Services. The company, headquartered in Seattle, shared revenue of $127.4 billion for the January-March quarter, a 9% increase from the previous year’s $116.4 billion.

This exceeded the $124.6 billion projected by analysts surveyed by FactSet. Amazon’s profits for the quarter stood at $3.2 billion, about 31 cents per share, surpassing the expected $2.24 billion. This marks a substantial improvement from the same quarter in the previous year when the e-commerce giant incurred a quarterly loss due to the devaluation of its investment in Rivian Automotive, an electric vehicle firm.

Following the release of the earnings report, Amazon’s stock prices climbed by up to 10% in after-hours trading as investors initially responded positively.

Amazon Stock Leaves Investors Shocked: Here’s What Happened — Twitter

However, the company’s executives have disclosed the persisting challenges with AWS, leading to a 2% decline in stock prices. Thursday’s report concludes a hectic earnings week for significant tech firms. Meta, the parent company of Facebook, exceeded profit and revenue, resulting in a surge in its stock prices during after-hours trading. Microsoft also saw a significant surge in profits on Tuesday, fueled by a robust performance in its cloud sector, Azure.

In his yearly shareholder letter released earlier this month, Amazon’s CEO Andy Jassy acknowledged that AWS, the leading player in the cloud market, was facing challenges as companies became more cautious in their spending amid greater economic uncertainty. The company reported 16% growth in the segment during the first quarter on Thursday, exceeding analyst predictions but revealing a significantly slower performance than last year’s 37% growth rate.

Amazon’s online retail business showed no growth in the first quarter, with the unit growing by only 3% when excluding foreign exchange rates based on Amazon’s calculations.

The company executives stated that shoppers are becoming more cost-conscious and trying to reduce expenses where possible. Moreover, many consumers have reduced their reliance on e-commerce, which had surged due to the pandemic and led Amazon to report record revenue figures previously. Amazon’s CFO, Brian Olsavsky, highlighted that consumers are still cautious about their spending due to high inflation and are purchasing lower-priced items to make their budgets last longer.

Nevertheless, he pointed out the company is observing encouraging signs in its international sales due to a relaxation in economic pressures in Europe, as well as growth in its advertising. Amazon has been transitioning its warehouses from a national to a regionalized network model, aiming to improve delivery speed and save on costs. It, however, forecasted its revenue for Q2 on Thursday to be in the range of $127.0 billion to $133.0 billion, which is in line with the analyst estimate of $129.87 billion.