Amazon CEO on Tariffs: ‘It's Impossible to Know What Will Happen'
Rehashing some of the narrative from the company's first quarter earnings call, Amazon CEO Andy Jassy said that despite the tariffs, the e-commerce giant has not seen diminishing demand or meaningful price appreciation in the first half of the year.
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But Jassy left room for all outcomes for the remainder of the year.
'That could change in the second half,' Jassy said. 'There are a lot of things that we don't know.'
Although Jassy said tariffs' effect on retail prices and consumption has often been 'wrong and misreported,' the CEO also acknowledged 'it's impossible to know what will happen,' particularly when it depletes pre-tariff inventory.
Jassy was also wishy-washy on the ensuing costs from the tariffs, noting that the company is unsure at who's going to end up absorbing the higher expenses. He noted that with 2 million sellers on its marketplace, there is a range of differing strategies on whether to pass on the higher costs to consumers.
The earnings call occurred hours before President Donald Trump announced new tariffs on several U.S. trade partners ahead of Friday's deadline to conjure up new trade agreements. Those tariff rates are expected to kick in Aug. 7.
Higher tariffs on goods from China face an Aug. 12 deadline. More than 70 percent of Amazon sellers and brands say they source their products from China, according to a survey conducted last year by Amazon seller software platform Jungle Scout.
The tariffs that have been embedded since April have not slowed down sales at the Big Tech firm. Amazon's second quarter showed strong growth, with net sales increasing 13 percent to $167.7 billion in the second quarter, up from $148 billion in the year-ago period.
Net income increased to $18.2 billion in the second quarter, or $1.68 per diluted share, compared with $13.5 billion, or $1.26 per diluted share, in second quarter 2024.
Jassy highlighted some wins across Amazon's logistics operation, particularly as the company continues to restructure its inbound fulfillment network of warehouses near major ports to cut ground transportation expenses.
According to the CEO, Amazon increased the share of orders moving through direct lanes—where packages go straight from fulfillment to delivery without extra stops—by over 40 percent year-over-year.
'We've also reduced the average distance packages traveled by 12 percent and lowered handling touches per unit by nearly 15 percent,' Jassy said. 'We've made progress on order consolidation with more products positioned locally, we're able to pack more items into each box and send fewer packages per order. That has helped drive higher units per box and improved overall cost to serve.'
On the delivery end, which includes the company's $4 billion commitment to expanding same-day services in 4,000 rural communities, Amazon delivered 30 percent more items same day or next day in the U.S. than during the same period of last year.
The faster deliveries have helped push Amazon's third-party sellers to an all-time high of 62 percent of units sold in the quarter, according to Jassy.
Amazon's recently unveiled generative AI model for its warehouse robotics, Deepfleet, also got some shine in the call. Jassy said the model improves robot travel efficiency by 10 percent.
'At our scale, it's a big deal. DeepFleet acts like a traffic management system to coordinate robots' movements to find optimal paths and reduce bottlenecks,' Jassy said. 'For customers, it means faster delivery times and lower costs.'
Although the firm's second quarter was strong on the surface, investors were not too impressed with Amazon's overall results. Stock declined nearly 7 percent in after-hours trading Thursday, largely due to cash cow Amazon Web Services (AWS) underperforming competitors.
Despite forecasting third-quarter sales ahead of Wall Street estimates, Amazon issued a soft operating profit guidance of $15.5 billion to $20.5 billion in the period ending in September, compared with an average analyst estimate of $19.4 billion.
Sales are forecast to be $174 billion to $179.5 billion, the company said Thursday in a statement. Estimates, on average, were $173.2 billion.
The third quarter will include statistics from Prime Day, which took place from July 8-11—the longest iteration of the event Amazon has held. Jassy said the four-day shopping extravaganza drove records across sales, number of items sold and number of Prime signups in the three weeks leading up to the event.
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