Covid-19: Amazon and Apple report profit decline

US tech giants and retail players Amazon and Apple both reported a profit decline last night (30 April), but their quarterly results announcements told very different stories.

Amazon said net sales in its first quarter were up by 26% year-on-year to $75.5 billion, as online sales remained buoyant during the coronavirus crisis – but CEO and founder, Jeff Bezos, acknowledged it is the "hardest time we’ve ever faced".

The tech company said costs associated with dealing with the virus – including recruitment, changes to its warehouses, and provision of personal protection equipment – would result in costs of $4 billion over the next quarter which will likely severely impact profitability.

Net income for the most recent quarter was down by $1 billion year on year to $2.5 billion, while operating income also fell $0.4 billion to $4 billion.

Meanwhile, Apple reported a 1% rise in revenue to $58.3 billion for the three months to March – the company’s fiscal second quarter. This was despite Apple stores across the world temporarily closing due to the pandemic, which contributed to net profit falling 2.7% to $11.25 billion.

Principal analyst at research group eMarketer, Andrew Lipsman, said: “Amazon's huge top-line acceleration isn't a complete surprise amid the pandemic's shifting consumer spending in favour of eCommerce and online grocery.

“The bottom-line performance was on the lighter side, but not altogether unexpected in light of the commerce business's escalating costs of labour and delivery logistics and shift in mix towards less profitable categories like grocery. The fact that the high-margin cloud and advertising businesses – both of which had downside risk – held up well, should help offset elevated costs in the commerce business over the next couple of quarters."

Yoram Wurmser, another eMarketer principal analyst, said Apple's performance was “pretty solid” despite a tough March, and revenue growth was encouraging considering the extent of Apple's exposure to the earlier Covid-19 -related lockdowns in Asia.

“The biggest bright spot for Apple was services, which grew 17% year-over-year,” he added.

“As people spent more time on their phones while locked away at home, they clearly were spending more money in the App Store and on some of the subscription services offered by Apple, including Apple Music and Arcade."