- Amazon said that the dollar’s rise this year has led to $900 million in sales losses.
- Due to Fed interest rate increases, the dollar has increased by nearly 16% in 2022.
- Amazon therefore earns less for exports that are paid in other currencies.
AmazonIt has warned that there is a danger. dollarThe company’s increase in sales this year led to $900 million less than it expected, which contributed to its poor third-quarter earnings performance.
Due to the Federal Reserve’s interest rates hikes, the US currency has surged in value. The US currency has risen 15.6% so far this year, compared to a basket six major currencies and rose 4.7% during the third quarter.
According to Amazon’s CFO, the soaring dollar exceeded the 3.9% Amazon had included in its forecasts. This impacted revenue.
Brian T. Olsavsky, an earnings call host, stated that the dollar strengthened during the quarter and that foreign exchange impacts were greater than the 390 base point impact we had incorporated in our Q3 guidance.
“This is a headwind of approximately $990 million, which is more than what we originally predicted.”
The Fed has increased interest rates from almost zero in March, to more than 3 percent now. Foreign investors looking for higher yields have been attracted to this Fed rate hike, and they are now eager to purchase dollars and sell their other currencies.
Amazon’s revenue is affected by a rapid appreciation of the greenback. This is because exports that are paid in weaker currencies in other countries bring in less dollars.
Olsavsky stated that Amazon’s revenue growth will likely continue to face dollar headwinds during the holiday shopping season.
He stated that he was still focusing on foreign exchange as the largest individual factor in Q4’s guidance. “This guidance contains 460 basis points year-over-year unfavorable impacts.”
“FX is a greater issue for us in terms of our revenue growth in dollars than on our income. Due to the international investments we make, it actually has a slight favorability,” he said.
Amazon isn’t the only tech giant warning that the surging dollar is impacting its sales. AppleThursday’s announcement by the company indicated that its fourth-quarter revenue will likely be reduced due to recent dollar strength.
Apple CFO Luca Maestri warned of a “nearly 10 percentage point” headwind — or roughly $12 billion — arising from the buck’s appreciation against other currencies.
On a third quarter earnings call, he stated that “Total company year over-year revenue performance will decrease during the December quarter as opposed to the September quarter.”
Amazon shares plunged 10.6% to $99.26 within minutes of Friday’s opening bell. Apple stock prices rose 4.1%, to $150.78.
Learn more Amazon stock drops 11% after earnings warning about holiday sales.
