AWS can’t help Amazon avoid first loss since 2015

AWS can’t help Amazon avoid first loss since 2015

Despite AWS going from strength to strength, the retail giant suffered its first quarterly loss since 2015 to start the financial year.

Andy Jassy (Amazon)

Andy Jassy (Amazon)

Credit: Amazon

Amazon’s fast-growing cloud division couldn’t help its parent company avoid posting its first quarterly loss since 2015.

Amazon Web Services (AWS) saw revenue grow by 37 per cent to US$18.4 billion for the first quarter of 2022. That amounted to an operating profit of $6.5 billion, which was up 57 per cent year-on-year and outpaced analyst expectations by almost $1 billion.

Both of its main cloud rivals, Microsoft Azure and Google Cloud, posted strong growth to start the year, as the market for cloud computing shows no signs of slowing down, despite the sort of difficult macroeconomic conditions which are impacting their parent companies.

"The pandemic and subsequent war in Ukraine have brought unusual growth and challenges,” said Andy Jassy, CEO of Amazon. “With AWS growing 34 per cent annually over the last two years, and 37 per cent year-over-year in the first quarter, AWS has been integral in helping companies weather the pandemic and move more of their workloads into the cloud."

Despite net sales of $116.4 billion for the quarter, Amazon at large fared less well to start the financial year. Amazon posted a $3.8 billion loss for the quarter, as falling post-pandemic demand, supply chain issues, the ongoing war in Ukraine and losses from its investment in the electric carmaker Rivian all dented earnings.

“Today, as we’re no longer chasing physical or staffing capacity, our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfilment network,” Jassy added.

“We know how to do this and have done it before. This may take some time, particularly as we work through ongoing inflationary and supply chain pressures, but we see encouraging progress on a number of customer experience dimensions, including delivery speed performance as we’re now approaching levels not seen since the months immediately preceding the pandemic in early 2020.”

According to Dave Fildes, director of analyst relations at Amazon, when speaking to analysts after the earnings were announced, the technology giant is "not immune" to such changing market dynamics.

"We see larger impacts of inflation, some line haul, shipping rates, fuel shipping supplies and wages, which we talked about in some recent quarters as well," he added. "And we also see some volatility in utility pricing for some of the energy costs in operating the AWS data centres."

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