Amazon expects second quarter loss

Amazon.com said it could post a second quarter loss even as revenue surges because it is spending at least $4 billion in response to the coronavirus pandemic, including plans to test its workforce for COVID-19.

Shares of Amazon, the world’s largest online retailer, fell 5% in after-hours trade. Under normal circumstances, Amazon would earn an operating profit of at least $4 billion in the current second quarter, but its costs will rise by that amount or more so it can respond to the pandemic, the company said.

The Seattle retailer forecast operating income will range from a loss of $1.5 billion to a profit of $1.5 billion, versus earnings of $3.1 billion in the same period a year prior.

Jeff Bezos, the company’s founder and world’s richest person, said in a statement, “we’re not thinking small,” a sign that the e-commerce company would invest heavily during the pandemic. Rival brick-and-mortar retailers have had to shut stores while Amazon hired 175,000 people.

This quarter, with government-mandated lockdowns in full swing, Amazon said it could see a 28% rise in revenue to $81 billion. Amazon has unsettled investors in the past with heavy spending on cloud data centers, streaming video and voice-controlled gadgets, which often paid off in the form of new businesses. Since mid-February, Amazon’s shares have risen by more than 10% including Thursday’s after-hours drop, while the broader stock market has sunk.

Bezos’ personal stake alone has grown by some $5 billion in that time.

The company is increasing investments because of the novel coronavirus in a similar way, said Kim Khan, US markets analyst at Investing.com.

Reuters