Amazon received my first FBA return of a wholesale product

Under the Disposition tab, I see “Customer Damaged”, and under the Return status, I see “unfulfillable, Immediate donation”.

What does that mean? Will Amazon pay for customer damage or I will have to bear that?

You have to bear it.

When a unit is returned to stock in unsellable condition, the customer is refunded but the unit stays in your inventory as unsellable.

You need to remove your unsellable units. If you have not configured settings to automatically remove them, your unsuitable inventory will be disposed of at Amazon’s earliest discretion based on capacity, including immediately after returns evaluation.

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Amazon will likely reimburse you for the customer-damaged item, but check your seller account for confirmation. “Unfulfillable, Immediate donation” means the item is unsellable, and Amazon may donate or dispose of it.

Amazon won’t pay anything under customer damage disposition.