Amazon has reported its quarterly sales and profit, which exceeded expectations. However, the company’s long-standing growth in cloud services is expected to face a slowdown.
The announcement had initially led to a $125 billion increase in Amazon’s stock value in extended trading. However, the entire gain disappeared within minutes, overshadowed by the slowdown in cloud growth and turbulence in business customers’ spending.
According to Amazon’s CFO, Brian Olsavsky, revenue growth rates dropped about five percentage points in April compared to the first quarter as cloud customers attempted to reduce their bills. Amazon has responded to this by assisting customers to achieve cost-cutting and build long-term relationships.
How Amazon is cutting costs
The news sparked a two percent share drop, highlighting a precarious moment for the company. Amazon’s CEO, Andy Jassy, has tried to cut spending across the company’s vast array of divisions in response to what he calls an uncertain economy.
The company is also facing competition from cloud rivals Microsoft and Google, who are introducing high-profile artificial intelligence tools. Since November, Amazon has made significant cost cuts, including plans to eliminate 27,000 corporate jobs. Its headcount has decreased by 10%, with 1.47 million full and part-time workers, including those in warehouses, in the just-ended quarter.
Amazon has also ended entire services, including its Halo health trackers. Additionally, it has restructured its national fulfilment operation to locate goods closer to shoppers and deliver them faster and at a lower cost.
The slowdown’s impact is significant
Despite these efforts, Amazon’s cloud slowdown has been described by analysts as “tremendous” compared to cloud rivals Microsoft and Google. Amazon’s CFO stated that the economy had brightened internationally, with decreasing inflation and increasing consumer confidence.
In the long term, Amazon is projecting confidence in its cloud services despite the slowdown, with a move towards the adoption of generative AI, which can create text, imagery, and other content from past data, presenting a massive opportunity for Amazon’s cloud, which runs on proprietary chips that can power most of what businesses wish to do with AI, and the company’s new AI tools.
Despite Microsoft’s financial report this week, which exceeded analysts’ expectations and drew business through AI, Olsavsky maintains that Amazon has not seen any shift in the competitive balance among cloud providers.
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