Amazon’s (AMZN) at a crossroads. After years of no-expense-spared growth, the company’s slashing costs wherever it can, CFRA Research Senior Equity Analyst Arun Sundaram told Yahoo Finance Live on Tuesday.
Under CEO Andy Jassy’s leadership, “The strategy is really changing,” Sundaram said. “It previously was a ‘grow at all costs’ model and now the strategy has shifted to a ‘grow at a more profitable rate model,’ and that’s exactly what we’re seeing today.”
Amazon revealed a new round of layoffs this week, cuts set to affect 9,000 of the company’s employees. That brings Amazon’s total layoff count from the last few months to 27,000, about 8% of its corporate workforce, which was 330,000 strong late last year.
However, that’s far from the only place Amazon’s looking to make up some financial ground – for a business as sprawling as Amazon’s, the reality is that there are a lot of possibly-cuttable areas.
“They’re also cutting some of their unprofitable businesses,” said Sundaram. “You know, we heard the announcement that they’re pausing the construction of their headquarters here in Virginia. They’re really looking at every nook and cranny to try to improve efficiencies and try to become profitable.”
Some of the areas that are getting sliced and diced include Twitch, which Amazon acquired in 2014 for $970 million, and Amazon Web Services, or AWS. The AWS cuts are both unsurprising and memorable. As the company’s massive, revenue-generating cloud business, AWS has long led the way for Amazon financially. However, the cloud giant’s growth has been slowing, and in Q4 2022 AWS’s missed revenue estimates were a blow, coming in at $21.3 billion versus the expected $21.76 billion. That slowdown has put Amazon in the difficult position of not only needing to make cuts there, but at the company across the board.
“You have to realize that even though Amazon grew massively over the past few years, they haven’t been able to grow profitably,” said Sundaram. “The last time their e-commerce business posted a profit was Q3 of 2021, and the last time their international business posted a profit was Q2 of 2021. So, it’s been a few years since Amazon has been profitable in those businesses.”
And it all goes back to AWS, he added.
“It’s really AWS that was lifting Amazon over the past few years, but now we’re seeing AWS growth slow,” Sundaram told Yahoo Finance. “So that’s why these tough decisions have to be made.”
Looking ahead, Sundaram said that at Amazon, and in e-commerce more broadly, more job cuts could still be on the table.
“I think there could be more waves of cuts, especially if the macro environment continues to go south,” he said.
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