Amazon has laid off almost 18K people as AWS growth slows
Amazon is downshifting in an unusual way. A large number of layoffs likely indicates that the corporation has grown too large since the pandemic boosted internet sales growth. And it’s a possible indicator of a shift toward a more profit-driven era.
AWS, the company’s consistently lucrative cloud segment, has ceased hiring since last November, which coincided with the layoffs.
On an earnings call on October 27th, Amazon CFO Brian Olsavsky blamed “the continuing impacts of broad-scale inflation, heightened fuel prices and rising energy costs,” for AWS’s slowing growth in the second half of the year.
“We expect these impacts to persist throughout the fourth quarter,” Olsavsky Explained. “We’re also taking actions to tighten our belt, including pausing hiring in certain businesses and winding down products and services where we believe our resources are better spent elsewhere.”
The trend of layoffs at tech companies, of which Amazon is a part, is not unique.
“Technology companies are following one another — and Wall Street — in trimming back their growth in employment,” in reducing their expansion in employment, J.P Gownder, VP and lead analyst at Forrester, told CIO Dive in an email.
According to Layoffs, approximately 150,000 IT workers were let go in 2022 across more than 1,000 businesses, including Meta and Microsoft.
Note that this is despite the fact that the need for IT workers has not decreased in other industries. Perhaps this will soften the blow for engineers, but it won’t help those in other fields who are being laid off.
Many computer firms, Gownder argues, have “Many technology companies seem to have gotten too far over their skis in hiring over the past couple of years,”
GlobalData Managing Director Neil Saunders noted in an email that the e-commerce behemoth had “a particularly frenzied expansion” during the epidemic, adding that the company had hired over a million people in the previous five years.
“All of this activity was predicated on the incorrect assumption that sales of Amazon’s products and services would continue to grow at a rapid clip,” he said. “With solid profits flowing, Amazon also became very bullish about expanding into new areas and was generous in staffing those divisions. However, it is now evident that the steep upward trajectory Amazon plotted over the pandemic years has come to an end.”
In a blog post, Jassy explained why the layoffs were necessary and reassured shareholders that the company’s disruptive spirit would endure.
“These changes will help us pursue our long-term opportunities with a stronger cost structure; however, I’m also optimistic that we’ll be inventive, resourceful, and scrappy in this time when we’re not hiring expansively and eliminating some roles,” he explained. “Companies that last a long time go through different phases.”
Though the savings are wise, Saunders noted that there is a potential downside to reducing waste.
“While the company has enough financial power to keep the lights on, a tighter environment means it will have to cut back investment on innovation,” This is “Given that this has been the hallmark of Amazon’s success over the years, this is a worrying prospect.”