Amazon.com Inc. reported its first quarterly loss since 2015, despite a rise in overall revenue, as ecommerce sales declined and costs rose.

Amazon reported total revenue of $116.444 billion in Q1 2022, up about 7% compared with $108.518 billion during the same period in 2021, and a net loss of $3.844 billion, compared with net income of $8.107 billion a year ago.

Sales results for North America were similar, with net sales reaching $69.244 billion, up about 8% from $64.366 billion a year earlier. International net sales dropped to $28.759 billion, down 6% from $30.649 billion a year earlier.

Ecommerce revenue dropped 3% in the quarter to $51.129 billion from $52.901 billion in Q1 2021, when government stimulus checks and the impact of the COVID-19 pandemic boosted demand for online retailers.

Amazon is No. 1 in the 2021 Digital Commerce 360 Top 1000. It is No. 3 in the Digital Commerce 360 Online Marketplaces database, which ranks the 100 largest global marketplaces.

The Q1 2022 net loss includes a pre-tax valuation loss of $7.6 billion in non-operating expenses from Amazon’s common stock investment in Rivian Automotive Inc.

Amazon’s operating costs grow

The quarter’s total operating costs grew to $112.775 billion, up more than 13% from $99.653 a year earlier. The Q1 2022 number included $20.271 billion in fulfillment costs, up almost 23% from $16.530 a year earlier. To blunt the impact of rising costs, Amazon on Thursday rolled out a 5% fuel surcharge charged to independent sellers on its website who use its shipping services.

During an April 28 conference call with analysts, Brian Olsavsky, Amazon’s chief financial officer, said the retailer was overstaffed and had too much warehouse space in the first quarter, mainly because of the retailer’s rapid hiring and warehouse expansion during the pandemic. He said Amazon is taking steps to adjust its operations but did not provide specifics.

Operating income decreased to $3.669 billion in the first quarter, down 58.4% from $8.865 billion in 2021. Amazon’s operating results would have been negative if not for the performance of the Amazon Web Services (AWS) cloud-computing unit. AWS’ revenue grew 37% year over year to $18.441 compared with $13.503. The unit’s operating income was $6.518 billion, up 57% from $4.163 billion in Q1 2021.

While its costs are rising, Amazon insists consumer demand remains strong. Olsavsky said Amazon is “not seeing softness” in consumer demand but remains alert to the potential impact of inflation on consumer spending.

“Our compound annual growth since before the pandemic stands at 25%, a growth rate higher than what we were seeing before the pandemic,” he said.

Olsavsky also confirmed that Amazon will hold its annual Prime Day sales event in July this year.

Research backs up Amazon’s assertion about solid consumer demand. According to Mastercard SpendingPulse, a benchmark that measures in-store and online retail sales across all forms of payment, total retail sales (excluding autos) increased 8.4% year-over-year in March. Compared with March 2019, the last pre-pandemic year, spending grew 18.0%, not adjusted for inflation. Mastercard found that ecommerce declined year over year in March. But compared with March 2019, U.S. ecommerce sales were up 83.7%, while in-store sales were up 9.4% compared to March 2019, Mastercard reported.

Analyst assessments

“Amazon has had a challenging quarter. However, the challenges that the company is facing are shared throughout the retail sector. Inflationary pressures and rising shipping and logistics costs put pressure on retailers and brands across the board,” says Deren Baker, CEO of Edge by Ascential, an ecommerce market data firm.

Despite these challenges, Baker says, ecommerce will continue to be the top driver of U.S. retail growth through 2026. He expects online U.S. sales to increase 14% in 2022.

Other observers agreed that Q1 was anything but stellar for the ecommerce giant.

“Amazon’s lackluster Q1 earnings are directly related to consumers’ shopping habits shifting as a result of skyrocketing prices and tightened purse strings amid inflation. As mask mandates continue to ease and more establishments fully re-open and welcome back customers, many are choosing to shop in-store over online. Why? Because they can,” says Lauren Lang, senior content manager of Constructor, a retail site-search technology vendor.

Andrew Lipsman, principal analyst at Insider Intelligence, told Bloomberg News Amazon turned in troubling results.

“This was a tough quarter for Amazon with trends across every key area of the business heading in the wrong direction and a weak outlook for Q2,” Lipsman, said “The struggles begin with the commerce business, which couldn’t reverse the softening growth of recent quarters and even went negative.”

Q2 guidance

During Q2 of 2022, Amazon says it expects the following:

• Net sales of between $116.0 billion and $121.0 billion, representing growth of between 3% and 7% compared with the second quarter of 2021.
• Operating results could range from a $1 billion loss to a $3.0 billion operating profit. That compares to a $7.7 billion operating profit in the second quarter of 2021.

During the quarter ended March 31, 2022, Amazon reported:

• North America sales of $69.244 billion, up about 8% from $64.366 billion a year earlier.
• International net sales dropped to $28.759 billion, down 6% from $30.649 billion a year earlier.
• Amazon Web Services revenue grew 37% year over year to $18.441 compared with $13.503 billion a year earlier.
• A net loss of $3.8 billion, compared with net income of $8.1 billion a year ago.

Percentage changes may not align exactly with dollar figures due to rounding.

Bloomberg News contributed to this report.

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