Amazon CEO Andy Jassy’s Massive Layoffs and Cost Reduction Are Paying Off
Amazon’s new CEO Andy Jassy is doing something right amid the Big Tech recession. The e-commerce and cloud giant yesterday (August 3) reported its biggest quarterly earnings growth since the Covid-19 pandemic thanks to Jassy’s massive cost-cutting efforts, including the largest layoff in the company’s history. For the April-June quarter, Amazon reported $134.4 billion in revenue, up 11 percent from a year ago, and an operating profit of $7.7 billion, or $0.65 a share, reversing a $2 billion loss in the same period last year. Both numbers beat analyst estimates. It’s also the first time Amazon achieved double-digit revenue growth since the fourth quarter of 2022.
Amazon has four main revenue sources: retail, cloud service (AWS), subscription and advertising. Here is the breakout:
- In the second quarter, Amazon’s online and physical store retail business generated $90 billion in revenue, up 10 percent from a year ago;
- Revenue from Amazon Web Services (AWS), historically a major profit driver, jumped 12 percent to $22.1 billion during the quarter;
- Subscription sales came at $9.9 billion, up 14 percent from a year ago;
- Advertising revenue grew the most by 22 percent to $10.7 billion. The pace far exceeds advertising revenue growths at Google and Facebook.
In addition to strong revenue, another contributor to Amazon’s return to profitability in the second quarter was cost reduction. Since last fall, Amazon has cut 27,000 positions globally in the company’s largest layoff in history. CEO Jassy also trimmed expenses elsewhere, including shelving unprofitable projects and optimizing the flow of goods. On yesterday’s call with analysts, Jassy emphasized Amazon’s shift from a nationwide fulfillment network to a series of regional systems serving smaller geographic areas.
“We keep a broad selection of inventory in each region, making it faster and less expensive to get these products to customers,” Jassy said. Amazon has an ambitious goal to keep revenue growth at double digits. For the current quarter, the company expects sales to continue growing at a 9 percent to 13 percent annual rate to somewhere between $138 billion and $143 billion.
“To still grow double digits on a base that size means that we’re acquiring a lot of new customers and a lot of workloads,” Jassy said. Amazon shares jumped 10 percent in yesterday’s extended trading on the earnings results. Amazon stock is up 66 percent this year so far, erasing much of last year’s loss.