Amazon reported a massive loss for the second straight quarter on Thursday as consumers returned to physical stores.
Apple also shared lukewarm news, revealing its profits fell 11% due to supply chain issues caused by the pandemic and COVID lockdowns in China.
However, tech stocks rallied after hours as sales from Apple and Amazon beat expectations – despite inflation and economic turmoil raising fears of a recession.
Apple on Thursday reported earnings and sales that beat Wall Street forecasts.
The company has handled parts shortages better than expected and has benefited from relentless demand for iPhones, even as inflation is pushing consumers to cut back on other spending.
Amazon’s sales topped $121 billion in the quarter, but the company posted a $2 billion loss as it continued to work to control costs,
Many of them were related to expansion during the business windfall it experienced at the start of COVID. The loss, however, was lower than in the first quarter of this year, when the company reported a loss of $3.8 billion. The loss was the first since 2015 and was also impacted by a large writedown at their electric vehicle company, Rivian.
Amazon shares jumped another 12% in after-hours trading.
Share prices of Amazon and Apple jumped during after-hours trading as reported results were less disappointing than expected
Apple on Thursday reported earnings and sales that beat Wall Street expectations, handling parts shortages better than expected (file photo)
CEO Andy Jassy said in a statement that Amazon is seeing revenue accelerate as it invests in its Prime membership and offers more member benefits, such as its recent deal to give free access to the delivery service. of Grubhub meals for a year.
He said Amazon continues to feel inflationary pressure from rising energy and transportation costs, but has made progress in controlling expenses related to its distribution network.
Between 2019 and 2021, Amazon nearly doubled the number of warehouses and data centers it leased and owned to meet growing consumer demand.
But as consumers changed their habits, Amazon ended up with too many workers and too much space, adding billions in additional costs.
The company has sublet some of its warehouses, terminated some of its leases and postponed the construction of others to deal with the problem.
Andy Jassy, CEO of Amazon, said the company is working to limit the impact of inflation on its revenue
Amazon offices can be seen in San Francisco. The company takes action to deal with a loss of sales
Brian Olsavsky, Amazon’s chief financial officer, said on a Thursday media call that the company is slowing its expansion plans for this year and next to better align with customer demand.
On the labor side, Amazon was able to reduce its workforce through attrition and staffing levels were more in line with demand, Olsavsky said.
AWS, the company’s highly profitable cloud computing unit facing growing competition from Microsoft Azure, reported revenue of $19.74 billion, a 33% increase year over year. last.
Its advertising business, another booming revenue stream, brought in $8.76 billion, an 18% increase from a year ago.
Despite Wall Street’s celebration, the e-commerce and tech giant’s revenue growth still landed at a relatively slow 7%, the same as the first quarter of this year and its slowest in about two decades. .
Consumers and businesses are also feeling the brunt of soaring inflation, which is at its highest level in 40 years.
Faced with rising food and gas prices, Americans have reduced their purchases of discretionary items, forcing Walmart, Target and other retailers with extra inventory to offer more discounts on items like the electronic.
Olsavsky said third-party sellers accounted for 57% of total units sold on Amazon during the quarter, the highest in company history.
Amazon expects to post $125 billion to $130 billion in revenue in the third quarter, up 13 to 17 percent from the same period a year ago.
Analysts expect $126.49 billion, according to FactSet.
Apple, meanwhile, said sales and profit for the quarter ended June 25 were $83.0 billion and $1.20 per share — above estimates of $82.8 billion and $1.16 per share, according to Refinitiv data.
iPhone employee works in Ganzhou, China amid strict COVID protocols – which have hurt Apple’s business
Apple’s profits were down 8% from the same quarter last year and 11% from last quarter – second-quarter profits were $25 billion, but on Thursday the company said its Third-quarter profits were $19.4 billion.
But the company’s shares rose 3% in extended trading after earnings were better than expected.
Sales in Greater China, once one of the company’s most promising regions, fell about 1% in the quarter.
Bright spots for the company were iPhones, which saw sales up 3% year-over-year, and Services, which drove revenue up 12% year-over-year .
Results were hampered by Mac revenues, down 10% from the same quarter a year earlier, and iPads, down 2% year-over-year.
Apple CEO Tim Cook told CNBC that the effects of inflation were being felt, but they were able to weather the impact.
“We are seeing inflation in our cost structure,” Cook said.
“We see it in things like logistics and salaries and some silicon components and we’re still hiring, but we’re doing it on a deliberate basis.”
Luca Maestri, Apple’s chief financial officer, told Reuters there has been no slowdown in iPhone demand.
“Our June quarter results continued to demonstrate our ability to effectively manage our business despite the challenging operating environment,” Maestri said in a statement containing the results.
Investors were watching Apple closely as economic indicators turned negative. In the past, the iPhone maker’s loyal and relatively affluent customer base has helped it weather dips better than other mainstream brands.
A crowded period of earnings from the world’s biggest tech companies was mostly disappointing, but investors seemed relieved the news was no worse.
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