Amazon shares were off 10% from their close in the after-hours as the company reported a first quarter loss of $7.56 which missed a consensus expected EPS of $8.40. Net sales met estimates, coming in at $116.4 billion. North America and AWS (cloud computing) were the two bright spots for the top line, while subscription revenue from Amazon Prime, advertising, and online store sales outside of the U.S. were generally lower than expected.

Operating margins are feeling the pressure due to higher inflation, specifically in shipping expenses. Worldwide shipping costs have increased by 14% year over year for the company, due to a sharp rise in fuel and wage expenses. Given that Amazon’s e-commerce business was already a low-margin enterprise, higher expenses are going to be hard to offset going forward.

Furthermore, the company already increased Prime subscription prices and added a fuel surcharge for its third-party online merchants in the first quarter. Despite these developments, the company projected weaker than expected numbers for the third quarter. The company sees 2Q net sales at $119bn at the midpoint, versus an estimate of $125bn.

Additionally, the company projected a second quarter loss as well. On a positive note, Prime Day is expected in the third quarter this year, while the investments Amazon has made into its supply chain could start bearing fruit going into the holiday season. Lastly, despite the large first quarter loss reported by the company, the balance sheet remains solid, with cash topping $36 billion as of quarter end.