Coronavirus lockdowns sparked increased demand for Amazon’s services in the first quarter but profit fell more than 30% as the company spent heavily on responding to the pandemic.
CEO Jeff Bezos said the crisis was “demonstrating the adaptability and durability of Amazon’s business as never before, but it’s also the hardest time we’ve ever faced” as it seeks to provide for customers while also protecting employees.
“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” he said in a news release.
For the first quarter, Amazon net sales rose 26% to $75.5 billion amid a surge in online shopping by consumers confined to their homes. But net income fell to $2.5 billion, or $5.01 per diluted share, from $3.6 billion, or $7.09 per diluted share, a year ago.
Wall Street analysts were expecting earnings of $6.25 per share on net sales of $73.61 billion.
The decline in profit reflected in part a 29% increase in operating expenses to $71.5 billion as Amazon invested in more than “150 significant process changes in our operations network and Whole Foods Market stores to help teams stay healthy.”
Bezos said there would be a lot more of such investment to come.
“Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit,” he said. “But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe.”
CFO Brian Olsavsky said Amazon expects to spend $300 million in the second quarter to develop the capability to test staff for the coronavirus and around $1 billion for the full year if the initial effort is successful.
“Amazon built its commanding position by spending all its cash to grow before it became the profit-making machine it is today. It’s doing the same thing during this lockdown period and will likely come out a winner again,” Kim Khan, U.S. markets analyst at Investing.com, told Reuters.