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AWS is laying off hundreds of employees active in sales, marketing and services. It says the round of layoffs is to streamline its operations, but experts argue that a disappointing growth figure relative to competitors is the real motive.

SVP Matt Garman argues that AWS does not make such decisions lightly. Because the company is in an “incredibly fast-moving industry,” layoffs are said to be a necessary evil.

However, a more obvious cause is the shifting cloud market. One need only take one look at AWS’ market share relative to its competitors to spot the clear downward trend. While Microsoft (24 percent) is rapidly catching up to AWS’ global lead (31 percent), Google Cloud (11 percent) is growing slightly and AWS is steadily declining.

In addition, many existing customers’ budgets are shrinking, reducing revenue for AWS. The phenomenon of customers spending less, admittedly, has been apparent for over a year and is not unique to AWS itself. Still, growth rates akin to those from Azure and Google Cloud would have helped significantly, but they are failing to materialize.

Cutting costs

AWS’ decision to cut costs cannot be separated from the downward trend in the cloud market versus its competitors. Analyst at Forrester Research Lee Sustar agrees. As hyperscalers are turning to AI, the battle for market share has taken on a new dimension. Microsoft’s commitment to the technology is huge, while AWS also has a less convincing story to tell relative to it as well as Google Cloud. Right after re:Invent in November, we already noted that generative AI works in favour of AWS’ two biggest competitors, not AWS itself.

Read more: AWS forgets to re:Invent, lashes out at competition

Earlier, the hyperscaler and its parent company Amazon already decided to lay off 18,000 employees and an additional 9,000 later on. Thinning out the payroll is not only usually rewarded by Wall Street, but it also gives a company the opportunity to invest in other initiatives. Those earlier rounds Amazon attributed to “overhiring” as a result of the massive growth of the cloud market brought on by the Covid pandemic. Now, such an excuse no longer applies.