Amazon Stock Struggles as it Restructures Workforce

For years, e-commerce giant Amazon seemed unbeatable, making other companies shiver when it moved into their markets. Amazon stock rocketed to four-digit territory, and the company’s earnings reports often excited investors.

Following a year of unfavourable earnings reports, Amazon has launched a major restructuring and plans to cut its workforce by 27,000 employees.

Read on to learn more about tech giant Amazon, its plans to cut jobs, and long-term opportunities for the company.

About Amazon

Amazon is one of the Big Five American tech companies which include Alphabet (Google), Apple, Meta and Microsoft. It is the largest e-commerce company in the world, and a leading cloud computing and streaming services provider. The company, founded by Jeff Bezos in 1994, quickly evolved from an online bookstore to an online marketplace selling millions of products. The current CEO of Amazon is Andy Jassy. He was appointed on 5 July 2021. Bezos holds the executive chair on the board of directors.

Amazon to cut 9,000 jobs in second round of layoffs

In late March, Amazon announced plans to lay off an additional 9,000 jobs, on top of the 18,000 job cuts it announced in January 2023. Amazon’s recruiting and human resources teams, its sprawling retail group and devices teams were heavily affected.

Amazon shares dropped 1.7% to $97.29 in New York. The stock is up about 16% this year.

Last month, Amazon said operating profit may continue to plunge in the current quarter, hit by the financial impact of consumers and cloud customers limiting spending.

Sassy also suggested that more job cuts are possible.

Amazon is undergoing the largest layoffs in its history after it boosted its workforce by 75% during the Covid pandemic to keep up with great demand. By the end of 2021, the company’s global workforce increased to more than 1.6 million. The figure was up from 798,000 in the fourth quarter of 2019.

Cuts are a worrying pattern

Amazon’s cuts come less than a week after Meta Platforms announced that it was reducing its workforce by 10,000 and closing about 5,000 additional open roles in its own second major round of job cuts.

Other tech companies have laid off employees, including Google parent company Alphabet Inc., Microsoft Corp., Dell Technologies Inc. and International Business Machines Corp.

According to data compiled by Bloomberg, as of early February, more than 67,000 jobs had been lost across the industry since the beginning of the year.

This concerning pattern continues from 2022 when the tech sector announced 97,171 job cuts. This number represented an increase of 649% on the previous year, according to consulting firm Challenger, Gray & Christmas Inc.

Amazon employs 1.54 million globally

Earlier in March 2023, Amazon said it would pause construction on its headquarters building in northern Virginia. However, the first phase of that project will open in June 2023 for 8,000 employees.

Amazon’s workforce, including warehouse workers as well as corporate roles, increased 100% to more than 1.6 million in approximately two years.

Due to increased fears over a potential recession, it also started making other cuts. Recently, it shut down a subsidiary that sold fabrics for almost 30 years. It also closed its hybrid virtual, in-home care service Amazon Care and made other cost-cutting moves.

Globally, the total workforce of Amazon was 1.54 million at the end of December 2022. Most of those workers are paid hourly and work in warehouses, packing and shipping products.

Before the first round of layoffs began in November, the firm had approximately 350,000 corporate employees.

A greater focus on cost savings

The most recent layoff announcements in March 2023 came after Amazon announced Q4 results on Feb. 2. The company surpassed on revenue. However, it missed earnings, as its usually strong cloud computing unit failed to rescue the e-commerce giant.

Amazon reported adjusted earnings of 3 cents a share vs. expectations of 13 cents. Revenue of $149.2 billion slightly edged views for $145.7 billion.

Revenue increased 9% from the year-ago period in comparison to 15% growth in the prior quarter. Amazon’s usually strong cloud unit showed that revenue slowed down. Amazon Web Services (AWS) sales increased 20% to $21.4 billion; that was below expectations and down from 27% growth in the previous quarter.

Optimistic about long-term opportunities

“In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon,” Jassy said in written remarks with the press release.

Jefferies analyst, Brent Thill, said in a note to clients after the earnings announcement: “We believe customers of Amazon Web Services are pausing, rather than cancelling spend, which suggests a quick turnaround once macro uncertainty subsides.”

Amazon also continues to invest in delivering packages by drones. In late December, the company began delivering orders by drones in California and Texas, in two small towns as part of its service Prime Air.

The maximum payload for an Amazon Prime Air drone is 2.2 kg. Amazon says that 85% per cent of its packages fall under that weight. The aim is to send packages to customers within an hour.

Amazon continues to push into the healthcare

In late February, Amazon closed its acquisition of One Medical in a $3.9 billion deal, giving it a primary healthcare provider with in-person and virtual treatment as well as lab tests and programs for preventive care.

“We’re on a mission to make it dramatically easier for people to find, choose, afford and engage with the services, products, and professionals they need to get and stay healthy,” said Neil Lindsay, senior vice president of Amazon Health Services, in a written statement with the Amazon news release.

Amazon has made a few forays into the healthcare market. In 2018 Amazon paid about $1 billion to acquire PillPack which gave the company the ability to ship prescriptions around the country. This made Amazon a direct threat to the more than $400 billion pharmacy business.

Amazon has long-held ambitions to significantly simplify how consumers receive health care. However, this remains an ambitious goal that has yet to emerge as a profitable venture.

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