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Earnings

Amazon earnings: Strong sales, but costs are going up

Amazon earnings: Strong sales, but costs are going up
  • Q1 revenue: $75.5 billion (26% YoY, -14% QoQ, vs. $73.6 billion expected)
  • Q1 earnings: $2.5 billion (30% YoY, -24% QoQ, below expectations)
  • Q2 revenue guidance: $75.0 billion and $81.0 billion, in line with expectations

The big number: Amazon will spend the entire amount of operating profit it expects to record during the second quarter — at least $4 billion — "on COVID-related expenses getting products to customers and keeping employees safe," it said in a press release.

People are talking: "I think we've learned that it's easier to get ready for a Prime Day than it is to get ready for something like this, when it all hits at once," CFO Brian Olsavsky said on the earnings call.

Opportunities: Amazon has always been a company less concerned with profit than most of its peers, and the decision to invest all of its expected second-quarter operating profit into personal protective equipment, cleaner facilities, and higher wages for its retail army could buy it some goodwill. Demand for online retail should continue to be quite strong in the second quarter even if stay-at-home orders start to lift around the country.

And Amazon should be able to fulfil that demand: It hired 175,000 employees just in March and April. The company now employs 840,000 people, up 33% from last year.

On the cloud side, AWS continues to post impressive growth on a large number, recording $10.2 billion in revenue during the quarter, up 33%. Rivals Microsoft Azure and Google Cloud are growing faster, but estimates suggest their combined revenue tallies for the first quarter are well below AWS.

Threats: The second quarter might be the biggest test of Amazon's vaunted operational skills in its history.

"It's an odd quarter, because generally the biggest uncertainty we have is customer demand and what they'll order how much of it they'll order," Olsavsky said. "Demand has been strong, and the biggest questions we have in Q2 are more about our ability to service that demand with the products that people are ordering, in a full way."

On other fronts, advertising has been a greater focus for Amazon over the last few years, and it's going to be a rough few months for the advertising market. Amazon is less exposed to that problem than companies like Google or Facebook, but Olsavsky said the company did see a slowdown in advertising demand over the last few weeks of March, as well as "downward pricing pressure."

The power struggle: It will take a lot to displace Amazon from its perch atop the online retail market, but Amazon's ability to control the spread of the pandemic across its massive workforce — larger than the population of four U.S. states — will play as important a role in keeping its operations running as fancy AI algorithms or robotic distribution centers.

Amazon plans to spend $300 million procuring and administering COVID-19 tests for that workforce as part of the aforementioned $4 billion investment. Depending on how the pandemic fares over the course of the year, that effort could wind up costing the company $1 billion, according to reports. That means the company will continue to rely on AWS to generate the lion's share of its operating profit for the foreseeable future, which could give rivals an opportunity to reignite the cloud pricing wars of a few years back.

People

Expensify CEO David Barrett: ‘Most CEOs are not bad people, they're just cowards’

"Remember that one time when we almost had civil war? What did you do about it?"

Expensify CEO David Barrett has thoughts on what it means for tech CEOs to claim they act apolitically.

Photo: Expensify

The Trump presidency ends tomorrow. It's a political change in which Expensify founder and CEO David Barrett played a brief, but explosive role.

Barrett became famous last fall — or infamous, depending on whom you ask — for sending an email to the fintech startup's clients, urging them to reject Trump and support President-elect Joe Biden.

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Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

People

Amazon’s head of Alexa Trust on how Big Tech should talk about data

Anne Toth, Amazon's director of Alexa Trust, explains what it takes to get people to feel comfortable using your product — and why that is work worth doing.

Anne Toth, Amazon's director of Alexa Trust, has been working on tech privacy for decades.

Photo: Amazon

Anne Toth has had a long career in the tech industry, thinking about privacy and security at companies like Yahoo, Google and Slack, working with the World Economic Forum and advising companies around Silicon Valley.

Last August she took on a new job as the director of Alexa Trust, leading a big team tackling a big question: How do you make people feel good using a product like Alexa, which is designed to be deeply ingrained in their lives? "Alexa in your home is probably the closest sort of consumer experience or manifestation of AI in your life," she said. That comes with data questions, privacy questions, ethical questions and lots more.

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David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Politics

Here’s how Big Tech is preparing for regulations in 2021

Companies know that the heat is only going to increase this year.

2021 promises to be a turbulent year for Big Tech.

Photo: Ting Shen/Getty Images

The open internet. Section 230. China. Internet access. 5G. Antitrust. When we asked the policy shops at some of the biggest and most powerful tech companies to identify their 2021 policy priorities, these were the words they had in common.

Each of these issues centers around a common theme. "Despite how tech companies might feel, they've been enjoying a very high innovation phase. They're about to experience a strong regulation phase," said Erika Fisher, Atlassian's general counsel and chief administrative officer. "The question is not if, but how that regulation will be shaped."

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Anna Kramer

Anna Kramer is a reporter at Protocol (@ anna_c_kramer), where she helps write and produce Source Code, Protocol's daily newsletter. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.

Power

Microsoft wants to use AR to see through fog and smoke

Apple autonomous cars, AI coffee orders, emailing help and other patents from Big Tech.

See what isn't there.

Image: Microsoft/USPTO

It's beyond dark out at 5:30 p.m. these days, so perhaps, as you're stuck at home with nowhere to go, you're tempted to log off your bad screen and onto your good screen a little earlier than you should. Perhaps that's what happened over at the U.S. Patent and Trademark Office, as this was a bit of a fallow week for patents from Big Tech.

That being said, there were still a few neat ones out there: Microsoft is looking into using AR to actually augment what you see; Apple is hard at work on autonomous vehicles; and Facebook, for some reason, is very concerned about the longevity of magnetic tapes.

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Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

Power

Microsoft wants you to live on as a digital chatbot

Drone blimps, emotional video editing, better Apple Watches and other patents from Big Tech.

Is this the future of customer service or a really creepy way to honor loved ones who've died? Maybe both!

Image: USPTO

Hello patent roundup readers! It's been a while since I've brought you the latest Big Tech filings from the U.S. Patent and Trademark Office. Blame Thanksgiving and the latest Protocol Manuals. But never fear: We're back now, and there were some truly great patents from the last few weeks. Amazon wants to edit content when it thinks you're sad and blanket the world in drone blimps; Apple is thinking about making long-living wearables; and Microsoft wants to digitally resurrect your dead loved ones.

And remember: The big tech companies file all kinds of crazy patents for things, and though most never amount to anything, some end up defining the future.

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Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

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