Amazon shares fall on bleak forecast and slowest growth since dot-com bust

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Amazon CEO Andy Jassy speaks with CNBC’s Jon Fortt.
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Amazon will report first-quarter earnings after the bell on Thursday.

Here’s what Wall Street is expecting:

  • Earnings: $8.36 per share, according to Refinitiv
  • Revenue: $116.3 billion, according to Refinitiv

Here are some other key revenue numbers:

  • Amazon Web Services: $18.27 billion expected, according to StreetAccount
  • Advertising: $8.17 billion expected, according to StreetAccount

Amazon and Apple, which also reports results on Thursday, are the last of the Big Tech class to update investors on their start to the year. So far it’s been a mixed bag, with ad-supported businesses struggling due in part to macroeconomic conditions and the war in Ukraine.

On Wednesday, Facebook parent Meta exceeded expectations on earnings and daily active users, but missed on revenue and gave weak guidance. A day earlier, Google missed on the top and bottom lines. Both companies said their ad businesses were impacted by issues like inflation as well as increased competition.

Amazon started disclosing advertising revenue for the first time in its fourth-quarter report, when it disclosed a $31 billion annual online ad business. Analysts expect to see 29% growth for the first quarter, faster expansion than Facebook or Google saw in ad sales during the period.

Amazon’s total revenue is expected to have increased 7.2%, which would mark the slowest rate for any quarter since the dot-com bust in 2001 and the second straight period of single-digit growth. Among other issues, the company is contending with slowing e-commerce momentum as physical stores reopen.

Growth is expected to tick back up in the second quarter, with analysts predicting expansion of 11% to $125.6 billion, according to Refinitiv.

Beyond e-commerce and advertising, Amazon’s results will give a sense of how the company is navigating a host of economic challenges, including rising inflation, higher fuel and labor costs, global supply chain snarls, and the ongoing pandemic.

Amazon has been working to offset many of those costs. Earlier this month, it introduced a 5% surcharge for some of its U.S. sellers, the first such fee in its history. And last quarter, Amazon hiked the price of its U.S. Prime membership for the first time in four years to $139 from $119.

Amazon still faces the specter of rising labor costs, especially after workers at one of its Staten Island warehouses voted in the company’s first U.S. union earlier this month. Another election is underway at a second Staten Island warehouse, and labor organizers have signaled interest at additional Amazon facilities. The company has challenged the union win, arguing the election results were tainted by interference from the union and the National Labor Relations Board.

Amazon shares are down roughly 14% so far this year, while the Nasdaq has dropped 18%. In 2021, Amazon was the worst-performing Big Tech stock, gaining just 2.4%.

Still, analysts like Wedbush Securities’ Michael Pachter remain bullish as consumers continue to rely on Amazon for so many goods, including groceries.

“In Q1, we expect that these products likely saw around a 5% increase in prices, assuming the new 5% surcharge is being implemented in order to cancel out the negative impact of inflation,” Pachter, who recommends buying the shares, wrote in a report last week. “Additionally, we believe inflation did not result in a material impact to revenue in Q1 due to robust consumer spending.”

Amazon’s cloud-computing segment could continue to be a bright for the company. Revenue at Amazon Web Services likely increased by 36% from a year prior. Cloud peers Microsoft and Google both beat analysts’ expectations for their cloud businesses earlier this week.

Investors will also key into Amazon’s investment in electric vehicle maker Rivian, which produced an almost $12 billion gain in the fourth quarter after the company held its IPO and saw its stock prop. The shares reversed dramatically this year, losing half their value as of March 31, and more since then.

On Wednesday, Ford recorded a loss of $5.4 billion on its 12% stake in Rivian. Amazon owns close to 18% of the company, according to FactSet.

This story is developing. Check back for updates.

WATCH: Amazon CEO Andy Jassy: This has been a time of extraordinary growth

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