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

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

Amazon should suffer less than its megacap peers 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 foreign 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.

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

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

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

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

The U.S. dollar index — which measures 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 late November through mid-January and has since fallen slightly.

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

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

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

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

Alphabet CFO Anat Ashkenazi said 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 finance chief Kevan Parekh warned last week that, “As the dollar strengthens significantly, we expect foreign exchange 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 will lead investors to pay close attention to job numbers out on Friday. When the Bureau of Labor Statistics releases its nonfarm payrolls count for January, it’s projected to show growth of 169,000, down from 256,000 in December, but nearly in line with the past 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 industry will wait to see what Nvidia has to say about foreign exchange when the chipmaker reports earnings later in February. In the period ending in October, Nvidia generated about 58% of its revenue from outside the U.S.

— CNBC’s Deirdre Bosa contributed to this report

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