Amazon predicts loss up to $1.5 Billion in Q2, while it spent $4 Billion in Covid-19

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Amazon on Thursday said it could post its first quarterly loss in five years even as revenue surges because it is spending at least $4 billion in response to the coronavirus pandemic, including plans to test its workforce for COVID-19 and predict loss of about $1.5 billion on the next quarter.

Under normal circumstances, Amazon would earn an operating profit of at least $4 billion in the current second quarter, but its costs will rise by that amount or more so it can respond to the pandemic.

Amazon has unsettled investors in the past with heavy spending on cloud data centre, streaming video and voice-controlled gadgets, which often paid off in the form of new businesses. Since mid-February, Amazon’s shares have risen by more than 10% including Thursday’s after-hours drop, which fell 5%.

Although Amazon may expect their operating income to be negative in Q2 due to COVID-related expenses, experts predict that this quarter may be one of the strongest in Amazon’s history. This prediction is based on several factors, but the two biggest are related to the government’s stimulus package and pervasive, lasting changes in consumer buying behaviour.

With all the cost expenses for health kits, safety policies, increased pay for hourly workers, and other measures. These can change with the change in factors as these are just predicted expectations.

Amazon will capture a leading share of consumer purchases made with the stimulus money. Some forecasts estimate that April will see approximately 50-60% growth YoY in the North American Retail segment, due in large part to consumers spending their stimulus checks on Amazon.

The fact that Amazon has captured the majority of stimulus purchases is a positive sign for brands on the marketplace. It will change the consumer’s buying behaviour. As almost all people are shopping online and are making the things lifted and delivered to the doorstep. The company is expecting a lasting impact from where shopper’s purchases.

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