Amazon shares jumped 12% despite a $2 billion loss from Rivian Investment

Lauren Rosenblatt / The Seattle Times

Amazon posted revenue growth of 7% in the second quarter of 2022, but reported a net loss of $2 billion, marking its second straight quarterly loss.

In the first three months of 2022, the company posted a net loss of nearly $4 billion. In both quarters, Amazon attributed the loss of its investment in electric vehicle company Rivian Automotive and its declining valuation. Amazon pointed to a $7.6 billion loss on Rivian’s shrinking valuation in the first quarter of 2022 and a $3.9 billion loss on its investment in the second quarter of 2022.

At the same time, Amazon has faced additional costs from economic pressures from inflation, increased fuel and delivery costs, and excess space in its fulfillment center and transportation networks.

Shareholders remained bullish on the company: Amazon’s stock price jumped nearly 12% on Thursday.

“Despite continued inflationary pressures on fuel, energy and transportation costs, we are making progress on the more controllable costs we outlined last quarter, particularly improving the performance of our fulfillment network,” CEO Andy Jassy wrote in a statement in Thursday.

Amazon reported that net sales rose 7%, from $113 billion in the second quarter of 2021 to $121 billion in the second quarter of this year. Stripping out the $3.6 billion impact of currency changes, Amazon said net sales rose 10%.

Operating income fell from $7.7 billion in the second quarter of 2021 to $3.3 billion this quarter. Operating expenses in the second quarter of 2022 were $117 billion, up from $105 billion in the same period last year.

In the second quarter of 2021, Amazon reported net income of $7.8 billion, or 76 cents per diluted share. This year, Amazon reported a net loss of $2 billion, or 20 cents per share.

When comparing the two quarters, Amazon noted that the annual two-day sales event, Prime Day, moved from the second quarter of 2021 to the third quarter of 2022. This year’s event sold more than 300 million items.

This quarter, Jassi said Amazon is “seeing revenue acceleration” as it improves benefits for Prime members by investing in faster delivery speeds and adding new features such as free delivery from Grubhub.

Amazon Web Services, the company’s cloud business, reported $19.7 billion in net sales, up from $14.8 billion in the same period last year.

On the retail side of the business, third-party sellers accounted for 57 percent of all units sold, the highest percentage in the company’s history, Chief Financial Officer Brian Olsavsky said Thursday.

The pressure of unexpected costs is starting to ease, Olsavsky said.

In the first quarter of 2022, Amazon saw an additional $6 billion in costs related to inflation, increased supply and fuel prices, pandemic-related shutdowns in China, productivity slowdowns as workers called in sick, and excess network space for execution. In the second quarter, that amount fell to $4 billion, and Amazon estimates it will drop to less than $3 billion in the third quarter.

The company has adjusted staffing levels and slowed the expansion of its fulfillment network to “better align” with customer expectations, Olsavsky said.

With inflation driving up prices across the board, Olsavsky said Amazon hasn’t seen a change in consumer spending on its e-commerce platform and doesn’t foresee an impact on its ad business even if customers choose to reduce their ad dollars.

“No one is immune” to budget cuts, Olsavsky said, but Amazon has “a very strong value proposition, especially in down economies, if that happens.”

But Amazon is bracing for increased electricity costs for its AWS data centers.

Tech giants aren’t immune to economic downturns, either: Microsoft and Google have already said they plan to slow hiring to prepare for a potential recession, and Olsavsky said Thursday that Amazon could also slow down. It will focus its hiring efforts on areas that help “grow products for customers,” he said, naming AWS and advertising.

“I think it’s right for people to step back and question their hiring plans,” he said. “I don’t think you’re going to see us hiring at the same rate we’ve been the last few years, but we’re going to continue to hire.”

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