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Amazon warned of the impact of Donald Trump’s global trade war as it issued weaker than expected guidance for the second quarter, sending shares of the ecommerce giant sliding.
In financial guidance on Thursday, the Seattle-based company added “tariff and trade policies” to the list of factors that posed a risk to its earnings.
Amazon said it expected operating income of between $13bn and $17.5bn in the current quarter, which compares with $14.7bn a year ago but fell short of Wall Street’s forecast of $17.7bn.
Analysts have warned in recent weeks that Amazon’s profits could come under pressure from the impact the Trump administration’s decision to engage in a trade war with China, imposing steep tariffs of up to 145 per cent.
Amazon has been negotiating steep discounts with vendors and seeking to damp the impact of tariffs. It imports roughly a quarter of items it sells from China.
Goldman Sachs analysts said ahead of Amazon’s results that the levies could knock $5bn-$10bn off the company’s operating profits this year, depending on how the trade war played out. That would represent a hit of 6-12 per cent on the $79.2bn in fiscal year operating profit that Wall Street has forecast.
Amazon also forecast net sales in the current quarter to come in between $159bn and $164bn, with the bottom range falling short of analysts’ expectations of $161.4bn.
The Seattle-based group’s March quarter revenues rose 9 per cent year on year to $156bn, narrowly beating estimates of $155bn, according to consensus estimates from S&P Visible Alpha.
Shares in the company were down almost 5 per cent in after-hours trading, ahead of its analyst call.
Amazon’s vast ecommerce platform continued to grow in the first quarter. Net sales in its online retail division were up about 5 per cent from a year ago.
Amazon this week locked horns with the US government after it emerged that its ultra-low-cost Haul platform had discussed listing import charges on consumer products, in a move similar to Chinese rival Temu.
Haul, which ships goods from warehouses in China, will be affected by the removal of de minimis rules which exempt items valued at less than $800 from duties, from May 2.
White House press secretary Karoline Leavitt on Tuesday said the proposals were a “hostile and political act” by Amazon. “Why didn’t Amazon do this when the Biden administration hiked inflation to the highest level in 40 years?”
Trump later spoke with Amazon founder Jeff Bezos before the company publicly walked back the proposal.
The company’s cloud division Amazon Web Services narrowly missed expectations but continued to show signs of strong growth.
AWS, which operates data centres and offers customers software tools, posted a 17 per cent increase in sales to $29.3bn, falling slightly short of consensus estimates of $29.4bn. Revenue from the company’s fast-growing advertising business rose 18 per cent to $13.9bn.
The company spent $24.3bn on capital expenditure in the first quarter, up from $13.9bn the previous year.
Chief executive Andy Jassy said earlier this year that the company planned to spend $100bn in capital expenditure this year, with the vast majority of this spending directed into its AI initiatives.
