Amazon blames disappointing results on fuel costs and lower demand

But cloud computing business continues to grow strongly

Amazon's stock dropped sharply in late trading Thursday after the company's first-quarter results and outlook disappointed investors.

Both the company's core online retailing division and its advertising segment missed Wall Street expectations, although its cloud business Amazon Web Services (AWS) had another great quarter.

The e-commerce giant also predicted weaker-than-expected revenues for the second quarter.

Amazon admitted that its hiring and warehouse-building spree during the pandemic is catching up with it, as e-commerce sales growth slows from the outbreak's blistering pace. Physical storage capacity has now outpaced demand.

Consumers are reverting to pre-pandemic habits, while labour and fuel costs continue to increase. Wth inflation and bills climbing worldwide, Amazon officials are also keeping an eye on whether buyers will cut back on their purchases to offset growing expenses.

Amazon's net sales in the first quarter were $116.4 billion, up just 7% year-on-year - compared to 44% annual growth in the same quarter a year ago. It is the weakest growth rate for Amazon since the dot-com bust in 2001, and the second consecutive quarter of single-digit growth.

The company said it lost $7.6 billion on an investment in Rivian, an electric vehicle manufacturer, after Rivian's stock dropped by more than half in the quarter to $32 a share.

The end result is that Amazon posted a total net loss of $3.8 billion for the quarter, compared to a profit of $8.1 billion in Q1'21.

Sales increased by 8% in North America, the company's largest market, although operating expenditures rose 16% to $71 billion.

Amazon's chief financial officer, Brian Olsavsky, said the company's costs were up $6 billion from a year ago, including $2 billion in inflationary pressures.

Despite disappointing results from retail and advertising segments, Amazon's cloud computing business continued to grow strongly.

AWS sales grew 36.5% YoY to $18.4 billion, above Wall Street's forecast of $18.3 billion.

New commitments from customers in areas such as aerospace, telecommunications, technology, healthcare and sports drove the growth.

"With AWS growing 34% annually over the last two years, and 37% year-over-year in the first quarter, AWS has been integral in helping companies weather the pandemic and move more of their workloads into the cloud," said Andy Jassy, Amazon CEO.

Overall company growth is expected to slow even further in the second quarter, to between 3% and 7%, according to the company's projections.

Amazon expects sales of $116 billion to $121 billion this quarter, falling short of the $125.5 billion average analyst projection.

Given the situation of the global economy and the conflict in Ukraine, robust growth is unlikely to return anytime soon.