Amazon.com Inc. gave a weaker-than-expected forecast for operating profit in the current quarter, pointing toward a long list of factors including tariffs and trade that may cause consumers to pull back on spending.
The world’s largest online retailer projected operating profit of US$13 billion to $17.5 billion, compared with an average estimate of $17.8 billion. Sales will be $159 billion to $164 billion in the period ending in June, the company said Thursday in a statement. Analysts, on average, expected $161.4 billion.
Amazon shares have fallen about 13 per cent this year as Wall Street weighs the impact of President Donald Trump’s tariffs on a retail operation that sources much of its goods from China. First-quarter results were generally in line with analysts’ estimates, but the company is clearly bracing for a slowdown in the coming months.
In issuing its forecast, Amazon added language on tariffs that wasn’t included the previous quarter. Results may be “materially affected by many factors,” such as “tariff and trade policies,” currency fluctuations and “recessionary fears,” the company said in the statement. Amazon didn’t mention tariffs when the company issued its first-quarter forecast in early February.
The company’s reputation for competitive prices and a broad base of suppliers could insulate it if shoppers become more deal-focused. But a pullback by the independent Chinese sellers who help stock Amazon’s warehouses could hit the logistics and high-margin advertising businesses.
The Seattle-based company has been growing more profitable in recent years as it cut costs and worked to streamline the logistics operation. Gross margin rose again during the quarter, but by the slowest pace in three years, to 50.5 per cent.
Amazon Web Services, the largest seller of rented computing power, reported first-quarter sales gained 17 per cent to $29.3 billion, in line with analysts’ estimates. It was the unit’s slowest growth in a year.
“Investors may be a little disappointed by margins and margin guidance, which could create a concern about Amazon absorbing tariff costs,” said Gil Luria, an analyst with DA Davidson & Co. “While AWS grew almost as expected, that comes on the tail of Microsoft Azure well exceeding expectations and growing that business almost twice as fast.”
The shares declined about 4 per cent in extended trading after closing at $190.20 in New York.
Revenue from third-party seller services increased 6 per cent to $36.5 billion, which fell short of analysts’ average estimate. Advertising, which has been the company’s fastest-growing unit, gained 18 per cent to $13.9 billion, in line with estimates.
“Amazon advertising remains vulnerable to cuts in spending from the many small and mid-sized sellers who will be most squeezed by tariffs on goods from China, and revenue growth from the third party marketplace has slowed significantly from the levels of just a few quarters ago,” said Sky Canaves, an analyst at Emarketer.
The White House lambasted the company earlier this week following a news report that Amazon was considering displaying the cost of tariffs to shoppers. The company said it was considering — and has no plans to implement — disclosing the cost of imports for Haul, its Temu-like storefront that features cheap goods shipped directly from Chinese sellers.
Amazon’s results follow a blowout quarter from rival Microsoft Corp., which on Wednesday reported stronger-than-expected sales and profit, suggesting customer demand for cloud services has held steady despite a wave of tariffs and economic turbulence.
First-quarter sales increased 9 per cent to $155.7 billion, compared with the average estimate of $155.2 billion. Operating income was $18.4 billion. Analysts projected $17.5 billion.
Matt Day, Bloomberg News
