Amazon Shares Dive After Surprise Earnings Miss

Amazon earnings fell far below expectations when the e-commerce giant reported first-quarter results after the market close Thursday. Though some on Wall Street had expected the Seattle-based tech giant to benefit from the increase in online shopping amid the ongoing coronavirus outbreak keeping people at home, Amazon CEO Jeff Bezos said that the company will spend an expected $4 billion in operating profit on coronavirus-related expenses in Q2.

Bezos noted in the earnings release that the current coronavirus crisis is “demonstrating the adaptability and durability of Amazon’s business as never before, but it’s also the hardest time we’ve ever faced.”

“Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit,” he said. “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. This includes investments in personal protective equipment, enhanced cleaning of our facilities, less efficient process paths that better allow for effective social distancing, higher wages for hourly teams, and hundreds of millions to develop our own COVID-19 testing capabilities. There is a lot of uncertainty in the world right now, and the best investment we can make is in the safety and well-being of our hundreds of thousands of employees. I’m confident that our long-term oriented shareowners will understand and embrace our approach, and that in fact they would expect no less.”

Earnings per share fell 29% to $5.01 during the quarter, while net sales rose 26% from the prior-year quarter to $75.5 billion. Analysts were expecting $6.25 a share on revenues of $73.61 billion.

Amazon’s stock closed up around 4.3% going into the earnings report, hitting a new high, but fell sharply in after-hours trading.

The ongoing coronavirus outbreak has meant tens of millions of people, both in the U.S. and abroad, are sheltering in place in a collective effort to fend off the spread of COVID-19. That has appeared to translate to more online shopping and more engagement with streaming services, although Amazon did not note any such bump in the latter in its initial earnings report.

The company, which has prioritized shipments of essential items such as medical supplies and household staples, is “acting aggressively to help protect customers from bad actors” and has removed over one million offers from its site “due to COVID-based price gouging,” and suspended over 10,000 selling accounts for violating its fair-pricing policies.

Amid complaints that customers are having difficulty finding grocery delivery windows, Amazon is also increasing order capacity for Prime Now, Amazon Fresh and Whole Foods Market. It is expanding Whole Foods grocery pickup to 150 stores, up from about 80 locations, and having certain locations dedicate time during the day to exclusively fulfilling online grocery orders.