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.

Climate

New Jersey could become an ocean energy hub

A first-in-the-nation bill would support wave and tidal energy as a way to meet the Garden State's climate goals.

Technological challenges mean wave and tidal power remain generally more expensive than their other renewable counterparts. But government support could help spur more innovation that brings down cost.

Photo: Jeremy Bishop via Unsplash

Move over, solar and wind. There’s a new kid on the renewable energy block: waves and tides.

Harnessing the ocean’s power is still in its early stages, but the industry is poised for a big legislative boost, with the potential for real investment down the line.

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Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).

Every day, millions of us press the “order” button on our favorite coffee store's mobile application: Our chosen brew will be on the counter when we arrive. It’s a personalized, seamless experience that we have all come to expect. What we don’t know is what’s happening behind the scenes. The mobile application is sourcing data from a database that stores information about each customer and what their favorite coffee drinks are. It is also leveraging event-streaming data in real time to ensure the ingredients for your personal coffee are in supply at your local store.

Applications like this power our daily lives, and if they can’t access massive amounts of data stored in a database as well as stream data “in motion” instantaneously, you — and millions of customers — won’t have these in-the-moment experiences.

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Jennifer Goforth Gregory
Jennifer Goforth Gregory has worked in the B2B technology industry for over 20 years. As a freelance writer she writes for top technology brands, including IBM, HPE, Adobe, AT&T, Verizon, Epson, Oracle, Intel and Square. She specializes in a wide range of technology, such as AI, IoT, cloud, cybersecurity, and CX. Jennifer also wrote a bestselling book The Freelance Content Marketing Writer to help other writers launch a high earning freelance business.
Entertainment

Watch 'Stranger Things,' play Neon White and more weekend recs

Don’t know what to do this weekend? We’ve got you covered.

Here are our picks for your long weekend.

Image: Annapurna Interactive; Wizard of the Coast; Netflix

Kick off your long weekend with an extra-long two-part “Stranger Things” finale; a deep dive into the deckbuilding games like Magic: The Gathering; and Neon White, which mashes up several genres, including a dating sim.

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Nick Statt

Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at nstatt@protocol.com.

Fintech

Debt fueled crypto mining’s boom — and now, its bust

Leverage helped mining operations expand as they borrowed against their hardware or the crypto it generated.

Dropping crypto prices have upended the economics of mining.

Photo: Lars Hagberg/AFP via Getty Images

As bitcoin boomed, crypto mining seemed almost like printing money. But in reality, miners have always had to juggle the cost of hardware, electricity and operations against the tokens their work yielded. Often miners held onto their crypto, betting it would appreciate, or borrowed against it to buy more mining rigs. Now all those bills are coming due: The industry has accumulated as much as $4 billion in debt, according to some estimates.

The crypto boom encouraged excess. “The approach was get rich quick, build it big, build it fast, use leverage. Do it now,” said Andrew Webber, founder and CEO at crypto mining service provider Digital Power Optimization.

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Tomio Geron

Tomio Geron ( @tomiogeron) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. Before that, he worked as a staff writer at Forbes, covering social media and venture capital, and also edited the Midas List of top tech investors. He has also worked at newspapers covering crime, courts, health and other topics. He can be reached at tgeron@protocol.com or tgeron@protonmail.com.

Policy

How lax social media policies help fuel a prescription drug boom

Prescription drug ads are all over TikTok, Facebook and Instagram. As the potential harms become clear, why haven’t the companies updated their advertising policies?

Even as providers like Cerebral draw federal attention, Meta’s and TikTok’s advertising policies still allow telehealth providers to turbocharge their marketing efforts.

Illustration: Overearth/iStock/Getty Images Plus

In the United States, prescription drug advertisements are as commonplace as drive-thru lanes and Pete Davidson relationship updates. We’re told every day — often multiple times a day — to ask our doctor if some new medication is right for us. Saturday Night Live has for decades parodied the breathless parade of side effect warnings tacked onto drug commercials. Here in New York, even our subway swipes are subsidized by advertisements that deliver the good news: We can last longer in bed and keep our hair, if only we turn to the latest VC-backed telehealth service.

The U.S. is almost alone in embracing direct-to-consumer prescription drug advertisements. Nations as disparate as Saudi Arabia, France and China all find common ground in banning such ads. In fact, of all developed nations, only New Zealand joins the U.S. in giving pharmaceutical companies a direct line to consumers.

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Hirsh Chitkara

Hirsh Chitkara ( @HirshChitkara) is a reporter at Protocol focused on the intersection of politics, technology and society. Before joining Protocol, he helped write a daily newsletter at Insider that covered all things Big Tech. He's based in New York and can be reached at hchitkara@protocol.com.

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