Amazon growth collides with rising inflation

Amazon’s second-quarter outlook was disappointing, too, with the midpoint of its forecast range marking the third consecutive quarter of single-digit revenue growth.


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com has a rough summer ahead. Or at least one very busy.

The e-commerce giant’s first-quarter results Thursday afternoon starkly demonstrated the multi-pronged impact of rising costs and slowing demand in an inflationary environment. Total sales of $116.4 billion rose just 7% year over year — the company’s slowest growth rate in at least 12 years. That’s in line with Wall Street estimates, but operating income of $3.7 billion was 31% below analysts’ goals.

Amazon’s second-quarter outlook was disappointing, too, with the midpoint of the company’s forecast range pointing to a third consecutive quarter of single-digit revenue growth and operating income at the lowest level in nearly five years. Amazon’s stock price is down nearly 10% in after-hours trading — leading to what could be the worst one-day drop for the stock since 2014.

The line between Amazon and Walmart is becoming increasingly blurry, as the two companies seek to maintain their share of the estimated $5 trillion retail market while shrinking the other’s share, often by borrowing the other’s ideas. Photos: Amazon/Walmart

Nobody expected an impressive quarter. High inflation and fuel costs are creating a poor operating environment for a company that operates fleets of planes and delivery trucks, which now employs more than 1.6 million full-time workers. Fuel costs alone are significant; US diesel prices rose 43% during the first quarter, according to GasBuddy tracker. Earlier this month, Amazon announced an additional 5% fuel charge added to its per-unit fee rates for sellers who use the company’s fulfillment network. But that won’t include items Amazon sells to itself through its online stores division, which still accounts for nearly half of the company’s total revenue.

Fuel prices are beyond even Amazon’s control. But the company has other areas where it can make improvements. Rapid construction of fulfillment centers and other delivery infrastructure that began early in the pandemic has increased warehouse space, which CFO Brian Olsavsky said added about $2 billion in “extra costs” during the quarter. On a call Thursday, Olsavsky said Amazon would work to eliminate inefficiencies over the next two quarters, though he added that it would be “mostly the fourth quarter” when the company sees the benefits.

That means Amazon has at least another rough quarter ahead — especially since the company indicated Thursday that its annual Prime Day sales event won’t take place until the third quarter of this year. Amazon’s outlook usually falls on the conservative side, and the stock is now at its lowest price in nearly two years. AWS’ cloud computing business is also doing very well, with revenue up 37% year over year and a record high operating margin of 35% in the first quarter. But while cloud computing keeps Amazon’s bottom line, most of the e-tail giant’s business remains dependent on its trucks keeping track. This is becoming more expensive than ever.

write to Dan Gallagher at

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