Diverging Fortunes of Major US Companies: Amazon Returns to Profit vs Intel Records Largest Ever Loss

The earnings of Amazon and Intel, representing the U.S. e-commerce and semiconductor sectors respectively, showed contrasting results. While e-commerce company Amazon posted results far exceeding market expectations, Intel recorded a record loss approaching 4 trillion won.

On the 27th (local time), Amazon announced through its earnings disclosure that it achieved a net profit of $3.172 billion (approximately 4.2944 trillion won) in the first quarter of this year. This significantly surpassed Wall Street's forecast of $2.24 billion. The profit margin also greatly expanded compared to the previous quarter ($300 million). Compared to the same quarter last year, it turned profitable. In the first quarter of last year, Amazon recorded a net loss of $3.844 billion.

Amazon recorded its first quarterly loss in seven years in the first quarter of last year due to the temporary decline in online demand following the lifting of COVID-19 lockdowns and the recovery of offline demand. Since then, concerns arose that losses might continue amid the onset of a high inflation era and increased cost burdens, but Amazon dispelled such worries by achieving better-than-expected strong results in the first quarter.

During the same period, revenue was $127.4 billion (approximately 170.9708 trillion won), up 9% year-over-year. This exceeded the expected $124.6 billion (approximately 167.2132 trillion won) compiled by market research firm FactSet.

However, the growth momentum of its core business units showed signs of slowing. E-commerce sales remained flat compared to the previous year, and the growth rate of Amazon Web Services (AWS), the cash cow and main growth driver, slowed significantly to 15.8% compared to 37% in the same quarter last year. The Wall Street Journal (WSJ) reported that this was "the slowest growth rate since AWS was separated as a distinct business unit in 2015."

[Image source=Reuters Yonhap News]

Andy Jassy, Amazon's Chief Executive Officer (CEO), recently expressed these concerns in a letter to shareholders. In the letter, he stated, "As recession fears deepen, companies are becoming cautious with their cloud investments," adding that "the AWS business is facing short-term headwinds." He acknowledged that the company is facing its toughest challenge since its founding but emphasized that it is focusing on investments with a long-term perspective and remains optimistic about the future.

Amazon is currently undergoing intensive restructuring and cost-cutting measures to reduce the overexpansion during the pandemic. Following the layoff of 18,000 employees in November last year, the company plans to lay off an additional approximately 9,000 employees by the end of this month, reducing its global workforce to 1.46 million as of the end of the first quarter. Last month, Amazon also halted construction of its second headquarters near Washington, D.C., focusing on cost reduction.

Amazon expects the improvement in performance to continue into the second quarter. It projected second-quarter revenue between $127 billion and $133 billion, aligning with Wall Street's forecast of $129.8 billion. Amazon's stock, listed on the Nasdaq, closed up 4.61% in regular trading on the day. Following the earnings announcement, buying momentum surged, and in after-hours trading, the stock rose more than 10% at one point.

[Image source=Reuters Yonhap News]

On the other hand, semiconductor company Intel posted a net loss of $2.76 billion (approximately 3.7 trillion won) in the first quarter. This marked a swing to a loss from a net profit of $8.1 billion in the same quarter last year, representing the worst quarterly loss on record. It was more than four times the previous largest loss of $687 million in the fourth quarter of 2017.

During the same period, revenue plummeted 36% year-over-year to $11.7 billion (approximately 15.67 trillion won), marking the worst quarterly revenue since 2010. Intel has experienced five consecutive quarters of declining revenue since the first quarter of last year. The Wall Street Journal (WSJ) reported that this was "a revenue level unseen since 2010."

This deterioration in performance stemmed from the poor performance of Intel's largest revenue source, the CCG (PC CPU division). The PC division's first-quarter revenue was $5.8 billion, down 38% year-over-year. PC sales, which saw a temporary recovery during the COVID-19 pandemic due to remote work and the spread of non-face-to-face culture, have worsened with the transition to the endemic era. According to market research firm International Data Corporation, global PC shipments in the first quarter fell 29% year-over-year.

The key to recovery lies in the rebound of the PC segment within CCG, which accounts for nearly half of sales. David Zinsner, Intel's Chief Financial Officer (CFO), said, "The market will return to normal by the end of the year when PC manufacturers deplete inventory and place new orders." Despite the record loss, expectations that semiconductor inventory will soon be depleted boosted investor sentiment, and Intel's stock rebounded nearly 5% in after-hours trading on the day.

This content was produced with the assistance of AI translation services.