For years, Amazon has prioritized growth over profit to establish itself as the world leader in e-commerce. Thanks in part to its cloud computing side business, the company ended 2015 in profit and has been profitable every year since. In 2021, it made a record profit of $33,364 million (more than €30,000 million at current exchange rates). But in 2022 the red numbers have returned. The company ended the year with a loss of $2,722 million, according to results released by the company this Thursday.
Amazon was able to further increase its sales. Revenue rose 9% to $513,983 million, a pace maintained in the fourth quarter. However, almost all of that growth came from Services, where the business is based in the cloud, while product sales were virtually flat. In fact, services have outpaced product sales at $271 billion to $243 billion.
Revenue in the cloud segment (Amazon Web Services, AWS) rose 29% to $80.1 billion, though it slowed in the fourth quarter. Excluding the $15.5 billion unfavorable impact of currency fluctuations during the year, the Group’s net sales would have increased 13% for the year.
Geographically, billing is growing 13% in the United States but falling 8% in the rest of the world. The international business multiplies its operating losses from $900 to $7,700 million. The North American business reduces its operating profit from 7,300 to 2,200 million. The company is increasingly reliant on AWS, which it accounts for separately and posts $22.8 billion in operating income.
The costs grew faster than the revenues. In addition, the loss in value of the investment company Rivian, manufacturer of electric cars, burdened the balance sheet result due to the valuation adjustment. The pre-tax valuation loss for this concept was $12,700 million compared to a revaluation of $11,800 million in 2021, which allowed it to post a record profit.
The company has announced that it will lay off around 18,000 employees, but figures show that the downsizing has already been intense over the past year. According to its own statements, it closed in 2021 with 1,608,000 employees and in 2022 with 1,544,000 employees. That’s down 4%, significantly more than the announced cut, and it was largely because the company shed 3,000 employees in its strongest fourth quarter, versus a year earlier when it added 140,000. The company has oversized itself in the pandemic and is now paying for the consequences.
The company released its guidance for the first quarter of this year. Net sales are expected to be between $121 billion and $126 billion, or grow between 4% and 8% compared to the first quarter of 2022. These forecasts assume an unfavorable impact of approximately 210 basis points from exchange rates. Operating income is expected to be between $0 billion and $4 billion, up from $3.7 billion in the first quarter of 2022.
“We face an uncertain economy in the near term, but we remain reasonably optimistic about the long-term opportunity for Amazon,” Chief Executive Andy Jassy said in a statement. “The vast majority of overall market segment share, in both global commerce and information technology, remains in physical stores and local data centers; And as this equation continually inverts, we believe that our leading customer experiences in these areas, coupled with the results of our continued hard work and inventiveness to improve every day, will drive significant growth for years to come. As we extend our investments and innovations to other broader customer experiences (e.g., streaming entertainment, consumer-centric healthcare, broadband satellite connectivity to more communities around the world), there’s more reason to be optimistic about what the future holds for us,” he added.
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