Dollar bites into Amazon

Hey Superheroes,

What’s more eventful than starting the week seeing news of U.S. President Donald Trump’s new tariffs? 

Both the ASX and Wall Street fell into the red on Monday after Trump signed executive orders imposing import levies on Canadian, Mexican and Chinese goods. Interesting move given that the three countries were the U.S.’s largest trading partners last year.

Canada retaliated almost immediately by announcing similar tariffs for U.S. imports, sparking concerns of an all-out trade war. 

Before that happened, the U.S., Canada and Mexico fortunately all agreed to pause on any tariff implementation to talk it out. Unfortunately this didn’t extend to Chinese goods. 

Aside from massive world news, ASX and Wall Street earnings seasons are now underway. Let’s take a look at this week’s biggest results.

Amazon blames the strong U.S. Dollar (USD)

It looks like a strong USD isn’t only sad for Aussies who want to go on a U.S. holiday but also for U.S. companies that earn their revenues from overseas – as counterintuitive as that sounds.

Despite beating expectations, Amazon provided lower-than-expected guidance for Q1 2025 earnings, blaming the greenback’s strength.

💵 Strong earnings

Before we get into that, here’s how Amazon performed compared to analyst expectations:

• Revenue: US$187.79B actual vs US$187.3B expected (↑0.3%)
• Earnings per share: US$1.86 vs US$1.48 (↑24%)
• Amazon Web Services revenue: US$28.8B vs US$28.8B 
• Ad revenue: US$17.3B vs US$17.4B (↓0.6%)

While the company performed well last quarter thanks to holiday sales, its guidance for the current quarter came in at US$151B-US$155.5B, a tinge lower than analyst expectations of US$158.5B. 

The forecasts signify revenue growth of just 5% to 9% – which at the lower end would mean Amazon’s slowest growth in history.

Amazon’s news release states: “This guidance anticipates an unusually large, unfavourable impact of approximately $2.1 billion or 150 basis points, from foreign exchange rates.”

Foreign exchange rates resulted in an unfavourable impact of US$2.3B on Amazon’s sales for the full year of 2024. 

Amazon shares fell over 4% in the afterhours market following the report.

🤖 Increase in investment spend

Amazon’s CFO announced the company’s plans to raise capital expenditures to US$100B this year – up from US$83B last year. Amazon aims to increase its AI and tech capabilities, which includes a new set of AI models and new chips.

Google’s interesting advancements

Google shares fell as much as 8% on Wednesday after revenues came in lower than expected. However, its earnings report came with some interesting news.

☁️ Not all bad 

Here’s how Google performed compared to analyst expectations:

• Revenue: US$96.47B actual vs US$96.56B expected (↓0.1%)
• Earnings per share: US$2.15 vs US$2.13 (↑0.9%)
• YouTube ad revenue: US$10.47B vs $10.23B (↑2.3%)
• Google Cloud revenue: US$11.96B vs $12.19B (↓1.9%)

Despite overall revenue not quite hitting the (analyst) mark, it’s still up nearly 12% year-on-year. Similarly, Google’s ad, search and services revenues and YouTube’s ad revenue all posted double-digit growth over last year. 

While Google Cloud revenues came in lower than expected, Google’s CFO claims that this was due to a lack of capacity rather than low demand. Google is set to invest US$75B in expanding its AI capabilities this year. 

🚗 Google’s “Other”

Perhaps the most exciting news is on Google’s “Other Bets” segment – a segment that’s composed of Google’s smaller segments that can’t quite stand on their own yet. These include Google’s life sciences unit Verily and its self-driving car segment Waymo.

Waymo’s robotaxi service is set to launch a commercial service across different cities in the U.S., with some in partnership with Uber. It also plans to expand operations to Tokyo this year to mark its first international expansion.

🔦  Some other things we’re shining the Spotlight on:

DOMINO EFFECT: ASX-listed Domino’s (DMP.AU) is up over 20% after announcing that its closures of over 200 unprofitable stores globally would see it save approximately A$15.5M. These include 172 stores in Japan and the remainder from Europe and Australia.

DROP THE MICRO: MicroStrategy has now rebranded to just “Strategy” with the Bitcoin logo now present on its company logo, signifying the company’s unique position as a Bitcoin treasury company.

NICK SCALING: Despite falling sales, lower profits and a dividend cut, Nick Scali shares are up 12% as its numbers still beat analyst expectations.

Next week we’ll be seeing some ASX big names report half-year earnings. These include AGL, Commonwealth Bank of Australia, JB Hi-Fi and CSL.

Keep up to date on the markets by following us on Instagram @superheroau!