Amazon.com's stock price (AMZN 1.63%) plunged 14% on Friday, as concerns regarding the online retail titan's slowing growth and rising costs drove many investors to sell their shares.
Amazon's revenue rose 7% year over year to $116.4 billion in the first quarter. That's down from 9% growth in the fourth quarter of 2021 and a staggering 44% increase in the prior-year period.
Amazon's pace of expansion has decelerated as the economy has reopened. A lifting of coronavirus-related restrictions in the U.S. and many other countries means more people are shopping inside traditional retail stores once again. E-commerce growth, in turn, has slowed. Online retail sales in the U.S. fell 3.3% year over year in March, according to digital payments leader Mastercard.
At the same time, inflation and supply chain disruptions are driving up Amazon's costs. Amazon is boosting wages to attract and retain enough workers amid a tight labor market. Soaring energy and shipping prices are also denting its profitability.
These challenges contributed to a greater than 58% decline in Amazon's operating income, to $3.7 billion.
Amazon's growth is likely to decelerate further in the second quarter. Management expects revenue to increase by 3% and 7% year over year to between $116 billion and $121 billion. Additionally, the company warned investors that it could generate an operating loss of as much as $1 billion, as it battles cost pressures.
Still, there were bright spots in Amazon's report. Most notably, Amazon Web Services continues to grow at an impressive clip. AWS' revenue jumped 37% to $18.4 billion, while its operating profits surged 57% to $6.5 billion. The computing infrastructure juggernaut should help to fuel Amazon's long-term expansion, as businesses shift more of their operations online in the coming years.