Amazon says operating profit could touch zero next quarter due to tough tech climate

Amazon said its next-quarter profit could fall to zero as the global tech environment worsens and consumers reduce spending.

“In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon,” CEO Andy Jassy said in a statement as the firm announced its financial results for the quarter ended December 31, 2022.

The California-based firm’s profit fell to $300 million, a significant drop from $14.3 billion in the same period a year ago. Its bottom line was dented by a $2.3 billion write-down of the valuation of its stock investment in electric vehicle startup Rivian Automotive.

However, Amazon logged better-than-expected revenue numbers in the fourth quarter of 2022, with overall revenue rising 9% to $149.2 billion. The firm’s cloud-computing segment Amazon Web Services (AWS) remained strong with net sales increasing 20% to $21.4 billion in Q4, compared to the previous year.

Amazon said it expects revenue of between $121 billion and $126 billion during the current quarter. It also expects growth in the cloud-computing vertical to slow over the next few quarters as a result of the tough macroeconomic conditions and prudent spending patterns of consumers.

In the last quarter, the company let go of more than 18,000 employees alongside other Big Tech peers Facebook and Google. “As we consider the ongoing uncertainties of the macroeconomic environment, this led us to the difficult decision to eliminate just over 18,000 roles, primarily impacting our stores and device businesses as well as our human resources teams. As a result, we recorded an estimated severance cost of $640 million,” Chief Financial Officer Brian Olsavsky, said during the earnings call.

The trio of big tech companies—Alphabet, Amazon, and Apple—all delivered underwhelming results on February 2. The results came a day after Facebook owner Meta posted better-than-expected fourth-quarter revenue and announced a $40 billion stock buyback, resulting in its stocks surging.