Amazon Expects to Spend $4 Billion on Coronavirus Response

CEO Jeff Bezos says company will spend all of Q2 profits — and perhaps more — on improving employee and customer safety

Amazon posted more than $75 billion in revenue when it reported its Q1 earnings on Thursday afternoon, while also sharing an ambitious plan to use its second-quarter profits towards “COVID-related expenses.” Despite topping Wall Street’s sales expectations, the company’s share price dropped 5% in early after-hours trading following Amazon’s projection it could lose up to $1.5 billion next quarter.

For Q1, Amazon’s sales hit $75.5 billion, up 26.5% from the same time last year and beating analyst projections of $74.1 billion. Its earnings per share of $5.01 fell short of analyst estimates of $6.10 EPS, while also falling short of the $7.09 EPS the company posted during the first quarter of 2019. This was the first quarter Amazon Web Services, the company’s cloud business, surpassed $10 billion in sales — marking an increase of 33% year-over-year.

Amazon declined to share an update on how many Prime members it has; the company said it hit 150 million Prime subscribers by the end of 2019 when it reported its holiday quarter earnings in January.

Moving forward, Amazon CEO Jeff Bezos said the company expects to invest heavily in equipment and services needed to combat the coronavirus pandemic.

“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” Bezos said in his letter to shareholders. “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 getting products to customers and keeping employees safe.”

Bezos added: “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.”

In its Q2 guidance, Amazon said it could report an operating loss of $1.5 billion next quarter — although its estimate also said a profit of $1.5 billion is in the cards, indicating how difficult the pandemic has made it to project sales.

Amazon shared dropped 5% to $2,345 per share after the company shared its Q1 report. The Seattle-based company had been on a roll heading into Thursday afternoon, with its share price surging more than 30% since mid-March.

Source: Read Full Article