In a supposed effort to get streamlined, stay competitive and “flatten bureaucracy”,
Amazon continued its overhaul to their corporate operations by laying off more than 14,000
workers last week. The move is the latest in CEO Andy Jassy’s promise to make Amazon
operate like “the world’s largest startup”, by jettisoning bureaucracy to move faster and
stay competitive.
The move follows the culture shift undergoing at Amazon since Jassy became CEO in 2021,
including a hard pivot back to in-office work and a push for employees to do more with
less.
“We’re working hard to try to flatten our organization and have fewer layers because in the
very earliest days of Amazon, it’s been true for many years, we had very high ownership at
every level of the organization, including on the frontline,” Jassy said at an Amazon hosted
event in front of thousands of world-wide sellers.
Another round of cuts is expected in January, after the holiday rush and Amazon’s annual
cloud conference, held in early December. Among the units expected to be impacted are
Amazon’s stores and human resources divisions.
The cuts will ultimately result in Amazon’s largest layoffs in their 31-year history. Amazon
has been trimming head count since late 2022, resulting in a total of 27,000 job cuts,
though more recent reductions have been on a smaller scale.
Amazon did show better than expected third-quarter earnings, and though their stock was
showing signs of trailing, a 14% jump over two days of trading put them at a record high on
Monday.
Amazon’s largest profit center, cloud computing unit AWS, reported second-quarter sales
of $30.9 billion, a 17.5% increase that was well below gains of 39% for Microsoft’s Azure
and of 32% for Alphabet’s Google Cloud. Still, estimates indicate that AWS will have
boosted third-quarter sales by 18% to $32 billion, though that is slightly lower than last
year’s 19% increase.
While Amazon’s e-commerce unit remains strong, Amazon and other retailers continue to
navigate the ongoing tariff challenges, as well as potential cost increases and a shift in
consumer demand.
Amazon’s Alexa service, an early leader in the voice assistant market, has faced
challenges from generative AI companies, mainly OpenAI. It remains unclear how well the
upgraded Alexa+ will fare, and it remains to be seen if that or newer consumer devices will
attract the attention of holiday shoppers.
Jassy continues searching for Amazon’s next growth opportunity, or “pillar”, to go
alongside their e-commerce, cloud and Prime membership program. The company has
invested in satellite internet, healthcare, entertainment and self-driving vehicles, with
varying results.
Jassy told investors the cuts were not a result of financial strain or AI replacing workers, but
rather a “culture” shift inside the company, spurred by a hiring spree during the company’s
ascension that left “a lot more layers” and slower decision making.
Jassy’s cost cuts have not just been layoffs, as he has shuttered several of Amazon’s
physical store chains, and retired the roving sidewalk robot, telehealth service, and health
and fitness wearables.
Earlier in the year, Jassy admitted that internal AI usage would shrink the corporate staff in
the coming years. At the same time, Amazon is aggressively investing in AI infrastructure
and pushing corporate employees to utilize AI tools in their work.
The results have been mixed, as some staff members were counseled to use the tools to
speed up their work, while others asked for more clarification in rolling AI out more
responsibly. Jassy is making the case that AI will transform work for the better and make
jobs “even more exciting and fun”, but Amazon’s own employee internal advocacy group,
Amazon Employees for Climate Justice, has published an open letter asking for more
responsibility in the AI rollout.
In all, Amazon appears to be heading for another big holiday selling season. It plans to offer
250,000 seasonal jobs to help staff warehouses and other needs, same as in the last two
years.
