[Amazon Q1 2022 Earnings] Amazon’s Stock Drops 10% as Ecommerce Growth Crawls
Amazon released its Q1 2022 earnings report after the market closed Thursday. This article covers everything you need to know about the ecommerce giant’s Q1 performance.
Also Read: Amazon Q4 2021 Earnings Report
Ecommerce Revenue Fell Short of Estimates
Amazon’s growth rates are observed to be the slowest since the dot-com bust way back in 2001 and marks the second straight quarter of single-digit growth as markets normalize after COVID, causing its stock price to drop 10% after market close. The revenue from its primary e-commerce business declined 3% year-over-year to $51.13B.
Like other tech giants, Amazon attributed its Q1 performance to the pandemic, rising inflation rates, and the subsequent war in Ukraine. Amazon has since levied a 5% additional fuel and inflation surcharge across the board as experts say inflation and supply chain crunches are driving costs higher.
It also reported a Q1 net loss of $3.8B (its first quarterly loss since Q2 of 2015), which includes a pre-tax valuation loss of $7.6 billion from its stock investment in electric vehicle maker Rivian—it saw a $12B gain on Rivian in Q4 last year.
|Source||Q1 2022 Revenue|
|Online Stores (ecommerce)||$55.13B (down 3% Y/Y)|
|Third-Party Seller Services||$25.335B (up 7% Y/Y)|
|Subscription Services||$8.41B (up 11% Y/Y)|
|Advertising Services||$7.877B (up 23% Y/Y)|
|Physical Stores||$4.59B (up 17% Y/Y)|
|AWS||$18.44B (up 37% Y/Y)|
|Other||$661M (up 26% Y/Y)|
This quarter, Amazon’s cloud computing arm (AWS) remains a strong driver for revenue, growing by 37% year-over-year. This figure beats out analyst predictions and is expected to stay strong moving into late 2022.
Also worth noting is Amazon’s net sales in international markets for Q1 2022 failed to see any growth, falling 6% compared with the same quarter last year.
|Q4 2020||Q1 2021||Q2 2021||Q3 2021||Q4 2021||Q1 2022|
|Net Retail Sales (North America)||$75.3B||$64.36B||$67.55B||$65.557B||$82.36B||$69.244B|
|Year-Over-Year Growth (excluding F/X)||40%%||39%||21%||10%||9%||8%|
|Net Retail Sales (International)||$37.47B||$30.65B||$30.7B||$29.15B||$37.27||$28.759B|
|Year-Over-Year Growth (excluding F/X)||50%||50%||26%||15%||3%||(6)%|
Advertising Growth Slowed Down
Amazon is not alone in reporting lackluster ad revenue this past quarter, at least in terms of Wall Street estimates. That said, its advertising segment, which it broke off from the “Others” segment for the first time in Q4 last year, saw a 23% growth year-over-year, beating out the growth rates of other advertising juggernauts like Google (22%) and Facebook (6.1%).
The ad revenue segment consists of the company’s sales of advertising services to sellers, vendors, publishers, and others through sponsored ads, display and video advertising.
|Q1 2021||Q2 2021||Q3 2021||Q4 2021||Q2 2022|
|Net Retail Sales (Advertising)||$6.38B||$7.45B||$7.6B||$9.7B||$7.877B|
|Year-Over-Year Growth (excluding F/X)||76%||88%||52%||33%||32%|
Prime Day Confirmed for July
Amazon confirmed during the earnings call that this year’s Prime Day will take place in July in more than 20 countries. The biggest implication for Amazon here is that moving its biggest shopping event to Q3 will hurt year-over-year Q2 comparisons—Prime Day took place in June last year.
For sellers, Prime Day is undoubtedly one of many important dates to remember to maximize profits throughout the year.
Doubling Down on Fulfillment
According to CEO Andy Jassy, Amazon is no longer chasing physical or staffing capacity and is rather squarely focused on improving productivity and cost efficiencies throughout Amazon’s rapidly growing fulfillment network.
The company recently launched a $1 billion venture investment program called the Amazon Industrial Innovation Fund, dedicated to empowering companies that are developing emerging technologies in customer fulfillment, logistics, and the supply chain.
The fund will focus on investing in companies tailored to incrementally increasing delivery speed as Amazon continues to double down on warehousing and logistics. Worth noting is that Shopify is also close to acquiring tech startup Deliverr in an estimated $2B deal to streamline its own order fulfillment capabilities.
Interestingly, Amazon’s Q1 2022 earnings call did not touch on its current drone delivery efforts, despite reports suggesting that it’s planning to have another go at the prospect of 30-minute drone deliveries to customer doorsteps after its Prime Air department imploded last year. Other companies including Google, Walmart, and FedEx are also ramping up their respective drone programs.
Inviting More Marketplace Sellers
Amazon introduced new tools for sellers including New Seller Incentives, which is a suite of benefits that include bonuses, credits, and discounts. For eligible sellers enrolled in Brand Registry, the benefits include:
- a 5% bonus on up to $1 million in eligible branded sales (up to $50,000 in bonus value) or for 1 year after eligibility is determined, whichever comes first
- $200 in credits for Amazon Vine, which is a platform where reviewers can exchange thoughts about Amazon products; and
- $100 in credits for Transparency, a program that helps you proactively protect your brand from counterfeiters.
It also recently rolled out the Perfect Launch playbook, tailored to guide new-to-Amazon selling partners. Both these tools, according to Amazon, will help selling partners grow their brand and promote their products on the platform.
Buy with Prime
Amazon is extending Prime benefits (ergo, fast and free delivery) to Prime members shopping outside Amazon.com through Buy with Prime. This new feature integrates a Prime button into your off-Amazon or direct-to-consumer sites (DTC) site, enabling shoppers to avail of Prime benefits by keying in their Amazon account information at checkout.
Whether this feature, which was rolled-out on an invite-only basis as of writing, will become the Shopify killer that some analysts predict it to be or go belly up after a few quarters remains to be seen. Here’s everything we know so far about Buy with Prime.
In its Q2 2022 financial guidance, Amazon expects a revenue growth of 3-5% for the second quarter of 2022, while operating income (loss) is expected to be between $1B and $3B, compared to $7.7B for the same quarter the preceding year.