Amazon hit by strengthening dollar, underscoring risks in tech to overseas reliance

The toughening dollar is posing challenges for the biggest U.S. tech companies, which have become increasingly reliant on overseas take. With other currencies weakening, money made elsewhere is worth less when converted into dollars.

Amazon should suffer less than its megacap aristocrats as the e-commerce giant generates a higher percentage of sales in the U.S. However, in its fourth-quarter earnings report on Thursday, Amazon said extrinsic exchange rates are to blame for the company’s weaker-than-expected first-quarter forecast and the possibility of its slowest revenue growth on record.

Takings in the current quarter will land between $151 billion and $155.5 billion, suggesting annual growth of just now 5% to 9%. Amazon’s slowest quarter for growth came in mid-2022, when revenue increased by 7.2%.

“This control anticipates an unusually large, unfavorable impact of approximately $2.1 billion, or 150 basis points, from remote exchange rates,” Amazon said in the earnings release.

On its earnings call that followed, Amazon said it saw $700 million “profuse of foreign exchange headwind than we anticipated” in the fourth quarter. During the period, international revenue totaled $43.4 billion, or 23% of blanket sales.

At Apple, roughly 58% of revenue came from overseas in the latest period. For Meta, it was 55%, Alphabet tell of about 52%, Microsoft slightly under 50% and Tesla just over 50% for all of 2024.

The U.S. dollar index — which in additions the greenback against a basket of rivals — hit its highest level in more than two years last month, ahead of President Donald Trump’s inauguration.  The dollar climbed steadily from belated November through mid-January and has since fallen slightly.

The dollar may be particularly volatile in the coming weeks and months due to uncertainties local Trump’s tariff policies and the threat of a trade war, most notably China, along with a lack of clarity in the matter of U.S. foreign policy, given comments Trump has made about potentially trying to take over Greenland and Gaza.

Here’s what other suites had to say on the topic of foreign exchange in issuing their financial results.

Microsoft CFO Amy Hood said foreign exchange did “not sooner a be wearing a significant impact on our results and was roughly in line with expectation,” though for the current quarter it would bring down profits growth by “more than 1 point.”

Susan Li, Meta’s finance chief, said the company expects “a three-point headwind in Q1” after non-native exchange “approximately neutral to revenue in Q4, just with the dollar strengthening, in particular against the euro.”

Alphabet CFO Anat Ashkenazi answered investors can “expect a larger headwind to our revenues from the strengthening of the U.S. dollar relative to key currencies in Q1 versus Q4 2024.”

Apple back chief Kevan Parekh warned last week that, “As the dollar strengthens significantly, we expect foreign transfer to be a headwind and to have a negative impact on revenue of about 2.5 percentage points on a year-over-year basis.”

The rise of the dollar inclination lead investors to pay close attention to job numbers out on Friday. When the Bureau of Labor Statistics releases its nonfarm payrolls enumerate for January, it’s projected to show growth of 169,000, down from 256,000 in December, but nearly in line with the one-time three-month average. The unemployment rate is projected to stay at 4.1%, according to the Dow Jones consensus for the report.

After that, the the tech diligence will wait to see what Nvidia has to say about foreign exchange when the chipmaker reports earnings later in February. In the years ending in October, Nvidia generated about 58% of its revenue from outside the U.S.

— CNBC’s Deirdre Bosa role ined to this report

WATCH: Why a stronger dollar could spell trouble for Big Tech