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Amazon Expects Unfavorable 3Q Impact from Currency Headwinds

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Amazon could provide revenue growth of 19% in 3Q15 despite currency issues

Amazon (AMZN) surprised investors and analysts in the last quarter with better-than-expected revenues and earnings per share. For 3Q15, the company expects its revenues to come in between $23.3 billion and $25.5 billion, a year-over-year (or YoY) growth rate of between 13% and 24%.

As the chart above shows, this is decent growth when compared to the last few quarters. However, this revenue growth expectation could have been even higher if not for the currency headwinds that Amazon expects in 3Q15. The company expects an unfavorable impact of 6.2% to its revenue growth due to the strong dollar (UUP) in 3Q15.

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The US dollar has shown some signs of weakening

The US dollar has continued to appreciate over the last year due to the strengthening of the US economy (SPY) and macro and political issues in other parts of the world. However, lately the dollar has shown signs of weakening as the US manufacturing PMI (Purchasing Managers’ Index) for August came out at a two-year low of 51.1, according to the Institute for Supply Management.

A weaker dollar would be good news not only for Amazon but also for other Internet companies. In the last quarter, Google (GOOG) and eBay (EBAY) both reported a 5% knock to their YoY revenue growth. Facebook (FB) noted a 7% hit to its revenue growth as a result of currency headwinds. These companies are expecting similar impacts from the strong US dollar in the September-ending quarter.

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