Amazon Stock (NASDAQ:AMZN)
The tech giant Amazon.com Inc. is expected to report stalling sales growth in the first quarter after demand fell for cloud computing and the tech giant embarked on a wide-ranging cost-cutting plan.
On Thursday, after the markets have closed, the company is going to release its earnings report for the first quarter. The consensus among the analysts polled by FactSet is that the company will post sales of $124.6 billion, which would represent growth of approximately 7% and represent a marginal deceleration from the rate of revenue growth that Amazon experienced a year ago. The consensus among industry experts is that Amazon turned a profit of $2.2 billion from January through March. This represents a significant turnaround from the nearly $4 billion that the company lost during the same three-month period in the prior year.
In recent months, Amazon has been making efforts to reduce costs and increase its focus on profitability. After having previously let go of approximately 18,000 workers in a previous round of layoffs, the company announced that it would complete the process of laying off approximately 9,000 corporate employees by the end of this month. The elimination of jobs at Amazon has been focused on less profitable divisions, such as the company’s device business, and the company has also ceased work on a number of projects.
It was announced in March that the company had halted construction on a large corporate real estate project known as HQ2 that was located close to Washington, DC. The company announced on Wednesday that it would be closing down its Halo division, which was focused on health and wellness, as well as discontinuing products including its fitness tracker.
Andy Jassy, the Chief Executive Officer of Amazon, recently wrote a letter to the company’s shareholders in which he acknowledged that the company has recently been confronted by one of the most difficult challenges it has ever faced in recent memory. However, he stated that the company’s executives are focused on investing in long-term projects and that he continues to be optimistic about the future.
The cloud computing division of Amazon, known as Amazon Web Services, is a growth and profit engine for the company but has had to overcome some unique obstacles. The division, which is commonly referred to as AWS, is expected to experience sales growth of approximately 15% for the quarter, which would be its slowest year-over-year pace since Amazon began to separate out the results of the business in 2015. It is anticipated that the company’s advertising business, which has also expanded rapidly, will slow down to approximately 15% growth, down from approximately 23% growth a year ago.
In his letter to shareholders, Mr. Jassy stated that Amazon Web Services (AWS) is dealing with “short-term headwinds right now” because businesses are spending less freely on cloud services out of fear of an economic downturn.
According to Andrew Lipsman, an analyst with the market research firm Insider Intelligence, “We’ve seen a pronounced decline in growth rates” for AWS. “We’ve seen a pronounced decline in growth rates” The expectations for Amazon right now are not particularly high.
The sales growth of Amazon’s competitors in the cloud computing industry has slowed down in a similar fashion. On Tuesday, Microsoft Corporation reported that the Azure cloud business had grown by 27%, while the cloud unit of Google, which is owned by Alphabet Inc., reported growth of 28%. According to Synergy Research Group, Amazon still holds approximately 34% of the market share for cloud computing, despite the fact that both of these companies have had higher growth rates in cloud computing than Amazon in recent years. However, Amazon still leads the market in terms of market share.
The company’s e-commerce services have also been negatively impacted by the slow growth of the company. The online store segment of Amazon’s business, which includes product sales primarily on its flagship site as well as sales of digital media content, has seen a decline in sales in recent years. After several years of exceptionally rapid expansion, analysts have discovered that the company’s market share in e-commerce and the growth of its Prime membership have both leveled off in the United States.
According to Mr. Jassy, Amazon is attempting to stimulate production by investing in businesses that are not central to its operations. Among these are the company’s international business, chip development, advertising, the company’s grocery store business, healthcare, and Project Kuiper satellite internet business.
Recently, the company has been increasing its marketing efforts for its work in generative AI models, which is the technology that underpins the popular ChatGPT. Amazon just recently made an announcement regarding new artificial intelligence offerings that are geared toward business clients.
Featured Image: Unsplash @ ghostdasquarian
