Amazon (NASDAQ:AMZN) stock is down 10% today after the e-commerce giant reported a rare earnings miss and provided weaker-than-expected forward guidance.
The online retailer reported a net loss of $3.8 billion, or $7.56 per share, for the first quarter of 2022. This compares to the $8.36-per-share profit that analysts were expecting, based on Refinitiv data. The Seattle-based company’s revenue totaled $116.44 billion, compared to the $116.3 billion estimate.
Before today, AMZN stock had been down 15% in the year to date. The company is scheduled to execute a 20-for-1 stock split on June 6.
What Happened With AMZN Stock
The surprise Q1 loss, the company’s first since 2015, mainly stems from a $7.6 billion loss on its investment in electric vehicle maker Rivian (NASDAQ:RIVN). RIVN shares have plunged nearly 70% year to date.
The Rivian loss aside, revenue at Amazon increased just 7% during the first quarter, compared with 44% growth in the first quarter of 2021. That was the slowest rate of revenue growth at Amazon since the dot-com bubble burst back in 2001. It is also the second consecutive quarter of single-digit growth.
Looking ahead, Amazon provided weaker-than-expected guidance for the current second quarter, forecasting growth of between 3% and 7% from a year ago. Amazon said it projects revenue in Q2 of $116 billion to $121 billion, lower than the $125.5 billion average estimate.
Why It Matters
Taken together, the Q1 net loss and weak Q2 guidance have shaken confidence in Amazon, leading to a sharp decline in the share price today. The company said that it has been struggling with multiple challenges this year, including rising inflation, higher fuel and labor costs, global supply chain constraints, the ongoing pandemic, and war in Ukraine.
While overall bad, Amazon’s first quarter print was not without some bright spots. The company reported that Amazon Web Services earned $18.44 billion versus the $18.27 billion estimate. Additionally, the company confirmed that it will hold its annual Prime Day discount sales event in July this year, which should help boost Amazon’s revenue and profits in the third quarter.
What’s Next for Amazon
While Amazon remains the biggest online retailer in the world, the company has shown that it is not immune to macroeconomic challenges and poor management decisions such as the Rivian investment. While AMZN stock might still prosper in the long run, its near-term outlook has gotten a lot less certain. As such, investors should proceed with caution concerning Amazon’s shares.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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