Amazon predicts an impact of $ 2.1 billion because of the dollar

Big Tech is facing a gigantic impact due to the strong dollar; Amazon deals with predictions and risks of external dependence

Amazon revealed in his profit report on Thursday (7) that his forecast for the first quarter includes an impact of $ 2.1 billion due to exchange rates. The company stated that this forecast considers “an uncommonly large and unfavorable impact” caused by the valorization of the dollar.

The impact of the strong dollar is being a major challenge for the largest US technology companies, which have become increasingly dependent on the revenue generated abroad. With the devaluation of other currencies, money earns outside the United States loses value when converted to dollars. This emphasizes the impact of the strong dollar on Amazon.

Although Amazon should suffer less than its large competitors, due to the fact that it generates a higher percentage of its sales within the US, the company also reported that the currency effect contributed to its slower growth in the first quarter.

This growth can be the lowest in its 28 years in the public market.

Amazon estimates that revenue in the current quarter will be between $ 151 billion and $ 155.5 billion, suggesting annual growth of only 5% to 9%. Amazon’s worst quarter of growth was recorded in the middle of 2022, when revenue increased by 7.2%. Considering the impact of the strong dollar on Amazon, the revenue can be even smaller.

In the statement about its profits, Amazon stated that the impact of exchange rates will be approximately $ 2.1 billion, which represents a reduction of 150 base points.

In its results teleconference, the company revealed that it saw an “additional impact of $ 700 million from exchange rates” in the fourth quarter. During this period, international revenue totaled $ 43.4 billion, or 23% of total sales.

Most US technology giants are also affected by the dollar force. Apple, for example, had about 58% of its revenue from outside the US in the last period. For the goal, the value was 55%, while Alphabet reported about 52%, Microsoft was slightly below 50%, and Tesla exceeded 50%by 2024.

The dollar index, which measures the value of the American currency compared to a set of other currencies, reached its highest level in more than two years last month, before Donald Trump’s inauguration. The dollar has risen constantly from the end of November until mid -January, but has since fell.

The dollar volatility may continue in the coming weeks and months, due to uncertainties on Trump’s tariff policies and the possibility of a trade war, especially with China, as well as the lack of clarity on US foreign policy, especially with statements with statements From Trump about the possibility of trying to take possession of Greenland and Gaza.

Other technology companies also commented on the impact of exchange on their financial results. Discussions ranged from exchange rates to issues such as the impact of the strong dollar on Amazon.

Microsoft’s CFO, Amy Hood, said exchange rates have not had a significant impact on their results, although for the current quarter, the impact will be a reduction of “more than 1 point” on revenue growth.

Already Susan Li, CFO of Meta, predicted “a three percentage impact in the first quarter” due to the valorization of the dollar, especially against the euro.

Alphabet’s CFO Anat Ashkenazi warned that investors should expect a greater impact on the appreciation of the dollar compared to the main currencies in the first trimester of 2024.

Kevan Parakh, Apple’s CFO, warned last week that, “with significant dollar appreciation, we hope that the exchange rate impact will have a negative effect of about 2.5 percentage points on revenue compared to last year.”

The increase in the value of the dollar will lead investors to carefully observe job numbers, which will be released on Friday.

Bureau of Labor Statistics should announce the counting of job openings outside the agricultural sector for January, with an expectation of growth of 169,000, below 256,000 recorded in December, but in line with the average of the last three months.

The unemployment rate should remain at 4.1%, according to Dow Jones consensus forecast.

After that, the technology sector will await Nvidia’s position on the exchange rate impact when the chip manufacturer discloses its results in February. In the period ending in October, Nvidia generated about 58% of its revenue outside the US.