Amazon’s quarterly results hold hints of a US economic slowdown


Amazon continues to be rising—however not as quick because it did final 12 months. And that has every part to do with the decelerating US economic system.

When Amazon reported its first-quarter earnings yesterday (April 27), it disclosed that each corporations and shoppers are spending much less—the previous on Amazon’s cloud companies and the latter on on-line purchasing.

At 16%, first-quarter progress in Amazon Internet Providers (AWS)—the cloud computing unit that has lengthy the corporate’s greatest profit-driver—was a lot slower than the 37% that Amazon reported a 12 months in the past. Andy Jassy, Amazon’s CEO, had warned of this in his annual shareholder’s letter launched in early April. In April, Amazon mentioned in a name with traders, AWS progress slowed additional nonetheless, to 11%.

On Amazon’s on-line retailer, e-commerce gross sales have been flat within the first three months of the 12 months, in comparison with the identical interval a 12 months in the past.

Two methods through which e-commerce consumers are altering, based on Amazon

💰 Customers have turn out to be extra acutely aware about their spending amid rising residing prices

🏬 A number of consumers have returned to in-store purchasing within the post-pandemic world

Quotable: Amazon helps companies spend extra cautiously on AWS

“[T]he actuality is that the way in which that we’ve constructed all our companies, however AWS on this specific occasion, is that we’re going to assist our prospects discover a strategy to spend much less cash. We aren’t centered on attempting to optimize in anybody quarter or anybody 12 months, we’re attempting to construct a set of relationships in enterprise that outlast all of us. And so if it’s good for our prospects to discover a strategy to be more economical in an unsure economic system, our staff goes to spend so much of cycles doing that. And it’s one of many benefits that…when it seems you’ve got much more demand than you anticipated, you possibly can seamlessly scale up. But when it seems that you just don’t want as a lot demand as you had, you can provide it again to us and cease paying for it. And that elasticity could be very uncommon.”

 Amazon CEO Andy Jassy, on the first-quarter earnings name

It’s not simply Amazon: Companies are spending much less throughout the board

General US GDP progress within the first quarter of 2023 has, at 1.1%, slowed drastically from 2.6% within the final quarter of 2022. As Quartz’s Nate DiCamillo identified, the slowdown was brought on by corporations easing off on additions to their stock and investments in buildings and tools. AWS was no exception to this development.

Nonetheless, within the face of rising competitors from the likes of Microsoft and Google, Amazon claimed it was assured of staying forward of its rivals. The corporate is “including extra {dollars}” in generative AI, based on Brian Olsavsky, Amazon’s CFO, which is expected to drive its subsequent progress section even in cloud.

By the digits: Amazon’s first-quarter earnings

9%: The fee at which Amazon’s income grew within the first quarter, to $127.4 billion, up from $116.4 billion throughout the identical interval the earlier 12 months

23%: The jump in Amazon’s advert income enterprise.

11%: The early rise in Amazon’s share worth after earnings have been launched, solely to be adopted by a drop of greater than 2% after the earnings name with analysts

10%: The shrinkage in Amazon’s workforce from a 12 months in the past, because of the firm chopping headcount by over 75,000

Charted: AWS continues to be the world’s greatest cloud supplier

Associated tales

☁️ How Amazon’s AWS hires for and develops hard-to-find cloud expertise

🌐 A complete Amazon cloud outage could be the closest factor to the world going offline

👨‍💻 Amazon’s Bedrock has entered the generative AI chat


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