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Amazon's Earnings Analysis

July 17, 2023
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Wiko Steyn
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Wiko Steyn

A review of Amazon's horrible quarter

Another miss from a big tech company, another giant crashes. The earnings summary is attached as an image. Let's dive in:

Positives

  • AWS, AWS, AWS
  • AWS grew 37% YoY and margins went up 20% from Q4
  • Ads are growing 
  • Physical stores are doing well

Negatives

  • Huge EPS miss
  • Retail is struggling
  • Bad company culture
  • Macro headwinds will continue to apply pressure

We are not adding Amazon shares to our Core Fund right now, we believe there might be more difficult quarters ahead for the retail segment. The huge EPS miss is mostly due to a big $7.6B loss on its investment in Rivian but there are some other red flags. Andy Jazzy, the CEO successor to Jeff Bezos, still has to prove that he can improve the margins of the company. We believe he is doing an exceptional job at AWS, but the excessive Capex spend on retail is not a good sign. Is Jazzy the right CEO for Amazon or should he rather have stayed at AWS and let Jeff Wilke run Amazon who has been Bezos's right-hand man for more than 20 years? Jazzy does a great job at AWS but the problem is that he is not used to the low margins business of retail. This space is particularly difficult and Wilke did a great job of managing it for years. Bezos chose Jazzy, Jeff Wilke left and now we have to wait and see what the future of Amazon holds. We expect AWS to continue marching forwards but retail might continue its struggles. 

 


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