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Amazon Posts Sluggish Online Sales, Strong AWS Growth

Amazon’s post-pandemic slump continued during the second quarter, as the e-commerce giant grappled with productivity challenges in its sprawling workforce, a costly space glut and sagging consumer demand. But because net sales came in at the high end of Amazon’s conservative forecasts investors seemed buoyed by the news, bidding its stock up 12% in after-hours trading. Revenue growth of 33% in...

Amazon’s post-pandemic slump continued during the second quarter, as the e-commerce giant grappled with productivity challenges in its sprawling workforce, a costly space glut and sagging consumer demand.

But because net sales came in at the high end of Amazon’s conservative forecasts investors seemed buoyed by the news, bidding its stock up 12% in after-hours trading. Revenue growth of 33% in its AWS cloud services business provided another bright spot.

Revenue increased 7% to $121 billion during the second quarter, Amazon reported Thursday, up from $113 billion during the same period last year. But the meager increase was offset by $4 billion in additional costs related to excess warehouse capacity and workforce inefficiencies, Amazon CFO Brian Olsavsky told reporters in a call.

Amazon spent big during the pandemic to rapidly scale up its logistics network, but last quarter said that it was grappling with a costly glut of warehouse space and workers, in addition to slowing online sales. Those trends will continue, the company said, despite cost-cutting measures like a 6% reduction in the company’s workforce during the second quarter. Olsavsky said that overcapacity in Amazon’s fulfillment network and workforce would cost Amazon between $2.5 and $3 billion next quarter.

Online store sales stagnated during the second quarter, barely budging from the beginning of the year, and decreasing by 4% from the year-ago quarter to $51 billion. Amazon’s sales growth has been trending downwards for multiple quarters now, thanks to tough comparisons versus year-ago periods, which benefited from the pandemic-era online shopping boom.

For the second quarter in a row, revenues for physical and digital product sales (not including services like Amazon Prime) shrank by 2% year over year to $56 billion. Meanwhile operating expenses grew by 12%, fueled by a 15% increase in the cost of running its fulfillment centers and a 3.5% increase in the cost of sales, which includes shipping and some transportation costs. Amazon posted a net loss of $2 billion compared, which reflected a $3.9 billion paper loss due to a decline in the value of its stake in Rivian Automotive.

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