Amazon today reported soaring sales as customers flocked to the ecommerce giant during the COVID-19 pandemic. First quarter results showed a 26 per cent lift in revenue, year-on-year, including US$10 billion from its market leading cloud computing division, AWS.
Amazon owner Jeff Bezos pledged to spend all of the company’s expected US$4 billion in Q2 profit on coronavirus-related expenses as pressure mounts over the company’s treatment of workers during COVID-19. Amazon shares fell 5.2 per cent in after hours trading.
“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” the tycoon said in a statement.
“Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit. 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.”
Bezos said the expenses would include personal protective equipment, improved cleaning of facilities, “less efficient process paths that better allow for effective social distancing”, increased wages for hourly workers, and hundreds of millions to develop Amazon’s own COVID-19 testing capabilities.
Demand for Amazon products and services surged as people were asked to remain in their homes to stop the spread of COVID-19. While it produced record sales it also strained Amazon’s fulfilment centres. Amazon temporarily refused to take more inventory for non-essential products and added 175,000 more warehouse and delivery staff.
However, there are several reports of Amazon workers fearing for their safety because of their working conditions during the pandemic. Coronavirus has spread to at least 50 Amazon warehouses, triggering protests from Amazon workers who have long struggled to unionise.
New York City officials investigated whether Amazon improperly retaliated against a worker it fired who had been involved in one such protest.
Amazon insists the worker was fired because he returned to work for the protest while on paid quarantine leave but a leaked Amazon memo from a meeting attended by Bezos showed company executives discussed a plan to smear the worker and make him “the face of the entire union/organising movement”, describing the employee as “not smart or articulate”.
Amazon reported quarterly revenue of US$75.5 billion, up 26 er cent fro the same period a year ago. But the sales jump came at a cost with Bezos noting the quarter as the “hardest time we’ve ever faced”.
Worldwide shipping costs increased 49 per cent to US$10.9 billion in the first quarter and the eccomerce giant spent hundreds of millions on COVID-19 related costs.
Profit fell 29 per cent to US$2.5 billion for the quarter.
Advertising and cloud computing were a bright spot, however. Amazon’s “other” category, which primarily refers to advertising and related services rose 44 per cent for the quarter to US$3.9 billion, adding weight to the argument Amazon may yet make digital advertising a triopoly.
Another Amazon cash cow, its public cloud division AWS, now accounts for 13 per cent of the company’s total revenue. This quarter AWS crossed US$10 billion in quarterly revenue, 33 per cent growth on an annualised basis.
AWS leads the cloud market over Microsoft with Google Cloud a distant third. But while AWS is still growing, its competitors are growing faster and it faces additional competition in the APAC market from Chinese giant Alibaba.