While Amazon had a rocky year, AWS remains reliable cash cow
Back in March 2020, when the world shut down, Amazon became the world’s go-to online store. When people couldn’t leave their homes, it became imperative to have goods come to them, and Amazon thrived. Money poured into its coffers, its stock price skyrocketed, and it hired like crazy and built warehouses to match the growing demand.
According to numbers from Statista, the company began the pandemic with approximately 840,000 employees in the first quarter of 2020. By Q1 2022, it had over 1.6 million workers. The problem was, as the pandemic loosened its grip on public life, people stopped buying everything online and returned to brick-and-mortar retail.
Amazon CEO Andy Jassy certainly seems to understand that the market has changed, and he has been having his managers look for places to cut spending and reduce operating costs, something many large organizations are doing amid a period of great economic uncertainty.
Amazon’s efforts included, if reports are accurate, cutting up to 10,000 jobs in the near term to offset the hiring that happened during the peak of the pandemic.
From a stock perspective, the company has given up almost all of the gains it picked up on the back of the pandemic, losing almost 50% of its value this year, per CNBC. That means Jeff Bezos is just a little less rich than he once was and his ex, MacKenzie Scott, has a little less to give away. Jassy, meantime, has many more headaches to deal with and pressure to cut operations costs.
Through all this, AWS, Amazon’s cloud arm, which Jassy ran before he got promoted to the corner office, has continued to perform at the same high level it always has. But even AWS reported a slowdown in the third quarter as companies tried to slash cloud costs.
Consider that in Q3 2022, the most recently reported quarter, AWS revenue hit $20.5 billion, below the $21.1 billion the analyst crowd expected. It may not seem like much, but cloud computing has been one of a few uber-growth areas, so a miss was a big deal.
That said, you can’t lose sight of the fact that AWS is now on a run rate to become an $80 billion business, so that’s not exactly something to hang your head about, and the consensus is that the cloud business still has plenty of room to grow in spite of external macroeconomic conditions.
In other words, AWS will probably be fine regardless of currency issues, slowing growth or customers looking at only modest IT spending increases in the new year. Jassy may have to cut costs across the company, but chances are AWS gets mostly spared from this exercise.
While Amazon had a rocky year, AWS remains reliable cash cow by Ron Miller originally published on TechCrunch