Amazon suffered sharp year-over-year earnings losses as post-pandemic shopping habits and inflation threw the retailer. In its third-quarter 2022 earnings report today, Amazon announced that operating income declined to $2.5 billion in the third quarter of 2022, compared to $4.9 billion in the same quarter last year, while net income increased $2.9 billion down from $3.2 billion in the third quarter of 2021.
Operating income refers to earnings after expenses, excluding borrowing costs, taxes and certain non-recurring items. Net profit shows the remaining profit after all costs have been deducted from the income from sales.
Amazon posted an operating loss of $0.4 billion in North America for the third quarter of 2022, an unfavorable result compared to the nearly $1 billion in operating income the company posted in the quarter a year ago. Internationally, the tech giant fared worse, posting an operating loss of $2.5 billion versus a loss of $900 million in the third quarter of 2021.
As usual, Amazon Web Services (AWS), Amazon’s cloud services arm, was a bright spot in an otherwise bleak neighborhood. AWS operating income was $5.4 billion in the third quarter of 2022, compared to $4.9 billion in the same quarter last year. However, that’s less than the $5.72 billion in operating income that AWS generated in Q2 2022.
Following the news of Amazon’s third-quarter losses, the company’s stock fell about 20% in after-hours trading. That also likely has something to do with Amazon’s shockingly vague Q4 guidance, which puts operating income at $0 billion to $4 billion, compared to $3.5 billion in Q4 2021. No, that’s not a typo – in between zero dollars and four billion dollars. My goodness.
“We are … encouraged by the steady progress we are making in reducing costs across our in-store fulfillment network and have a number of initiatives that we are methodically working through that we believe will lead to a stronger cost structure for will lead the future business,” CEO Andy Jassy said in a press release. “There is obviously a lot happening in the macro environment and we will balance our investments to make them more efficient without jeopardizing our key long-term, strategic bets.”
Amazon spent billions during the pandemic to double the size of its fulfillment network — a move that initially served it well but turned out to be short-sighted. The company was forced to close or postpone plans for over a dozen facilities as e-commerce sales grew at a slower-than-expected rate this year.
Another headwind — rising energy prices — is starting to have a big impact on Amazon’s business, with the company’s shipping spending rising 10% to $19.9 billion in the third quarter of 2022.
Tech broadly is faring poorly in the current macroeconomic environment. Microsoft this week reported its slowest revenue growth in five years, while Meta stock plummeted on losses from its investments in augmented and virtual reality technologies. Apple topped Wall Street estimates but wasn’t immune to the downturn either, as iPhone sales came in lower than expected.