Amazon’s stock plunged a brow-raising 12% after the company announced a quarterly net loss of $3.8 billion. Compared to the same period last year, the company had made a profit of $8.1 billion. Although the overall revenue grew 7% yearly to $116.4 billion, Amazon predicts that the revenue for the next quarter will be taking a dip. Several factors can be attributed to the plummeting stock:
Amazon was part of a $700 million investment into electric pickup maker Rivian Automotive in 2019. The company had provided the majority of the finding though the precise amount invested was not disclosed.
At the time of the investment, Rivian was rolling out an SUV and pickup truck using skateboard technology, which allows for off-road driving on various terrains. This provided an excellent opportunity for Amazon as it looked to expand its delivery fleet.
Rivian went public in November 2021 and quickly went downhill, with the company’s value dropping over 75% since its initial debut. Consequently, Amazon lost an estimated $7.6 billion following Rivian’s failure.
Post-Pandemic Frenzy Drop-off
The height of the pandemic was good for Amazon’s business as many people flocked to their website to stock up on toilet paper and household items. People were also experimenting with different and fun items that were going viral on social media sites like Instagram and TikTok.
Amazon saw a soaring 37% increase in revenue for Q3 of 2020. The overall net sales for the company in 2020 went up by 38% to $368.1 billion. With the slowdown of the pandemic in Q1, life started getting back to normal with mask mandates being lifted and social distancing guidelines eased.
With the holiday season in Q4 and another surge of COVID, most people got back to staying at home and shopping online. However, the demand was not as high as it was and the company reported a drop in revenue.
Issues of Supply Chain and Rising Rates of Inflation
The pandemic caused several supply chain issues and shortages that have affected almost every business. The situation was escalated by the conflict between Russia and Ukraine, which has contributed to more shortages and rising rates of inflation.
Amazon CEO Andy Jassy said that the company is no longer changing staffing or physical capacity. Their teams are squarely focused on cost efficiency and improved productivity throughout the fulfillment network.
Although implementing the measure will likely take time, especially due to ongoing inflationary and supply chain pressures, encouraging progress has been realized on several customer experience dimensions, including delivery speed performance. The company has also announced a 5% fuel and inflation fee to third-party sellers on its site as a way of offsetting the increasing costs.