Amazon Posts Net Loss for the Second Straight Quarter as It Manages Slower Demand

Amazon Posts Net Loss for the Second Straight Quarter as It Manages Slower Demand #Amazon #Posts #Net #Loss #Straight #Quarter #Manages #Slower #Demand Welcome to Lopoid

Amazon.com Inc.

AMZN 1.08%

reported slowing sales and a net loss for the second straight quarter, as strength in the tech giant’s cloud-computing business was outweighed by continued weakness in core retail operations suffering from the aftereffects of a pandemic boom.

Revenue for the tech giant in the latest period increased by 7.2% from a year earlier to $121.2 billion. That was a hair slower than the 7.3% rise in the first quarter, which had marked Amazon’s slowest growth in about two decades.

Amazon’s loss totaled $2 billion in the quarter, compared with a profit of $7.8 billion a year ago. The loss came partly because of the company’s stake in electric-vehicle maker

Rivian Automotive Inc.,

whose valuation has plunged this year, causing Amazon to book a pretax loss of $3.9 billion in the second quarter. Amazon’s North America division, which houses its core online retail business in its biggest market, reported a third consecutive operating loss, though it narrowed from the prior quarter.

Amazon’s net loss defied expectations for a moderate profit in the period, but its revenue grew faster than analysts anticipated, helped in part by the continued strength in cloud-computing and the services it provides to other vendors that sell on its site. Shares were up more than 13% in after-hours trading, hitting their highest point in about three months—though still down sharply from the start of 2022.

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Amazon and other tech giants that thrived through the pandemic—as more life and work shifted online—have consistently reported slowing growth in recent days, though in some cases not as much as investors had feared. Inflation is pushing up costs and crimping consumer spending power, and global uncertainty around issues running from Russia’s war on Ukraine to the persistence of Covid-19 has made individuals and businesses more cautious.

Amazon executives said that surging inflation is among its biggest challenges now but that the company has been able to pare costs anyway to help deal with its shifting circumstances.

“Despite continued inflationary pressures in fuel, energy, and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network,” Amazon Chief Executive Andy Jassy said.

The shortfall in the three months through June followed a loss in the first quarter of 2022 that was Amazon’s first in seven years. Mr. Jassy, who took the role a little over a year ago, is now shepherding the company through one of its worst stretches for financial performance in Amazon’s history.

As markets react to inflation and high interest rates, technology stocks are having their worst start to a year on record. WSJ’s Hardika Singh explains why the sector — from tech giants to small startups — is getting hit so hard. Illustration: Jacob Reynolds

Like other companies, Amazon is rethinking its hiring due to inflation and the economic environment, Brian Olsavsky, Amazon’s chief financial officer, said on a call with reporters after the quarterly report. “I don’t think you’ll see us hiring at the same pace we did in the last year or the last few years,” he said, but added that the company is still committed to hiring engineering positions, and in its cloud-computing and advertising divisions.

Amazon’s number of employees—which had more than doubled during the pandemic—slid about 6% during the second quarter to 1.52 million.

Mr. Olsavsky also said Amazon has slowed plans to expand its operations through next year, and plans to shift capital expenditures to cloud-computing and away from the company’s retail business.

The cloud-computing and advertising businesses have been reliable growth engines for Amazon. Revenue for Amazon Web Services, the largest cloud-computing company by market share, grew 33% to $19.7 billion in the second quarter.

Amazon’s advertising business, for which the company recently began breaking out financial data, grew 18% to $8.8 billion in the quarter.

The company said it expects its operating income for the third quarter to be between $0 and $3.5 billion, compared with $4.9 billion in third quarter 2021. It expects sales between $125 billion and $130 billion.

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Amazon’s core e-commerce business has been struggling with high costs and slowing growth in consumer demand as customers return to in-store shopping. Amazon’s online stores segment, which includes the bulk of its e-commerce operations, experienced a 4% decline in sales for the period. Amazon said revenue would have been flat in the segment if not for the impact of the stronger U.S. dollar, which reduces the value of overseas revenue.

The company also reported a 9% rise in sales of logistics and other services it provides to third-party vendors, a slight acceleration from earlier this year.

During the throes of the pandemic, Amazon notched record sales as its logistics network struggled to keep up with the influx of orders. At the time, the company decided to aggressively build out a network of warehouses, sortation centers and other expensive infrastructure that required significant capital investments. Now, with demand cooling as consumers head back into stores and spend money on travel and other experiences, Amazon has had to pivot.

To curb costs, the company has worked to more aggressively sublease millions of square feet of excess warehouse space, defer construction of new facilities and find ways to end or renegotiate leases with outside warehouse owners while thinning out its hourly workforce through attrition.

Other retailers that benefited from pandemic-era shopping are also working through a buildup of inventory as customers spend money in stores and on experience. In addition to a mismatch between supply and demand, they are also coping with record inflation that is eating into customers’ discretionary income as they deal with higher costs for everyday goods such as gasoline and groceries.

Amazon’s pretax loss from Rivian in the second quarter narrowed from the $7.6 billion hit it reported in the prior period. Amazon in the fourth quarter of 2021 had registered a $12 billion gain from the investment in the auto maker, which went public last year.

Write to Dana Mattioli at dana.mattioli@wsj.com

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