Net income for the quarter fell nearly 31% from the same period in the prior year to $2.5 billion, or $5.01 per share. Wall Street analysts had projected quarterly income of $3.15 billion.
CEO Jeff Bezos warned shareholders that the June quarter could also be challenging for the online retail giant’s finances, as the company plans to reinvest billions of dollars into managing coronavirus.
“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” Bezos said in a release. “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.”
However, Bezos added: “I’m confident that our long-term oriented shareowners will understand and embrace our approach, and that in fact they would expect no less.”
Handling a spike in sales
In addition to the costs of growing its fulfillment staff, the company also raised pay for hourly employees, which will cost the company nearly $700 million as of May 16, Amazon said in its Thursday release.
“We think that still was the right course of action and as we add capacity, we’re trying to resume more normal operations as far as the shipping of non-essential items” and shipping times, Amazon CFO Brian Olsavsky said on an analyst call Thursday.
The effects of covid-19 on cloud
At $10.2 billion, revenue from Amazon’s cloud business, Amazon Web Services, was essentially in line with analysts’ expectations, and up 33% from the prior year.
AWS drives much of Amazon’s profits.
However, the economic crisis caused by the pandemic may also mean fewer companies spending on enterprise services such as cloud.
Bucking the trend on advertising
Revenues from Amazon’s “other” division, which consists mostly of advertising sales, grew 44% to $3.9 billion.
But Amazon’s ad business was likely helped by the fact that so many people visited the site to stock up on goods during the quarter, Tom Forte, senior research analyst with financial services firm D.A. Davidson, told CNN Business.
“I think the Amazon advertising business is going to grow through this or take a lot of share,” Forte said.