Guidance

Amazon’s second-quarter guidance of 3%-7% net sales growth (really 2.6%-7.0% without rounding) is slow for Amazon. But there are a three major headwinds that put this into better context.

Guidance includes a 200 bps currency headwind, so ex-currency net sales growth guidance is 4.6%-9.0%.
There’s also the calendar shift of Prime Day, which occurred in 2Q 2021 but is pushed back to 3Q 2022 this year. Prime Day boosted 2Q 2021 net sales by 400 bps. Removing that $3.6 billion from 2Q 2021 improves the underlying year-over-year growth rate further to 8.0%-12.5%.

On top of that, 8.0%-12.5% net sales growth is weighed down by the difficult Covid comp that runs through half of this second quarter. CFO Brian Olsavsky said the Covid comps start to get much easier in mid-May.

With the e-commerce comps getting easier, the underlying growth rate should be lower than 8.0%-12.5% in the first half of the second quarter and higher than that during the second half of the second quarter. That higher growth rate could accelerate into the third quarter, all else equal, as comps continue to get easier through mid-May of 2023.

We also know Amazon’s multi-decade history of guiding on the conservative side on net sales growth. This exhibit shows Amazon’s net sales growth in red versus its prior guidance range in gray. Since 2001, Amazon’s actual net sales growth has averaged 94% towards the high end of its prior guidance range.

Of course, there is a big difference between the growth rates of AWS and the rest of Amazon, which I’ll call Amazon ex-AWS. AWS is probably going to grow 33% or thereabouts. Amazon ex-AWS might grow 2%. That would get me to 6.0% consolidated net sales growth for the quarter, towards the high end of the 3%-7% range.

But the Amazon ex-AWS piece is where virtually all of the currency impact lies and, of course, where all of the Prime Day impact lies. AWS defaults to billing its customers in U.S. dollars, and you can see the currency impact on AWS net sales over time is de minimus. When I attribute both currency and Prime Day to Amazon ex-AWS, it seems like management’s guidance for the underlying net sales growth of Amazon-AWS is something like 8% for the second quarter. That would actually be an acceleration from the first quarter’s underlying growth rate.

Big picture, it seems remarkable that Amazon ex-AWS has been growing as well as it has while comping against peak-Covid. And on a two-year basis, it just grew 50% in the first quarter versus the first quarter of 2020. There doesn’t appear to be much net currency impact on the two-year comp, and a Prime Day calendar shift wasn’t a factor, so that’s a good number. Like Brian said, sales went up and stayed up. Now it has been taking a breather to “just” mid-to-high single digit underlying growth.

That seems strong to me and inconsistent with the sentiment that Amazon’s retail business has gone ex-growth. And again, e-commerce comps start to get easier in mid-May so this underlying rate should accelerate in the following few quarters, all else equal.

Obviously, the reported numbers have some noise going on. The U.S. dollar could continue to strengthen. And then Prime Day falling in the third-quarter after not falling in the third quarter of 2021 will goose the reported growth rate in that period. But I’d rather look through those things and focus on the underlying growth rate.

Implied Expectations

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