Amazon Begins Second Round Of Layoffs, But Wall Street Is Unimpressed

Key takeaways

• Amazon announces 9,000-strong layoff round for its corporate departments including cloud services and advertising
• Its share price dropped 2% at the news, despite Meta enjoying the opposite effect last week with a similar layoffs announcement
• Amazon’s turmoil is not over yet as FTC investigations and sluggish sales loom over the e-commerce giant

The mass layoffs klaxon has sounded again. Amazon has become the second Big Tech company to announce further layoffs, with the latest job cuts set to total 9,000 roles lost.

It comes after Meta announced a similar-sized layoffs round, but the two stocks performed very differently after their respective news. While Meta was up, Amazon’s share price has dropped 2% since the report was confirmed.

With some more potential storms brewing on the horizon from the Biden administration and the FTC, Amazon’s share price woes may not be over just yet. Let’s get into it.

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What did Amazon announce?

Amazon confirmed on Monday it would be reducing its workforce once more by 9,000 roles. This second swing of the ax now brings the total job losses to 27,000 after an 18,000-strong layoffs round was announced in November 2022.

CEO Andy Jassy said the job cuts are due to the difficult economic backdrop that has been plaguing Big Tech in recent months. “Given the uncertain economy in which we reside, and the uncertainty that exists in the near future, we have chosen to be more streamlined in our costs and headcount,” the statement read.

Most of the roles will be in the business’s corporate aspect, including the shopping giant’s web services, people solutions, ads and streaming departments. The final decisions on job losses will conclude by mid-April.

Big Tech leaders continue to stress the word ‘lean’ while trying to reassure investors. “The overriding tenet of our annual planning this year was to be leaner while doing so in a way that enables us to still invest robustly in the key long-term customer experiences that we believe can meaningfully improve customers’ lives,” Jessy continued.

But the reassurances did little to assuage Wall Street from selling off Amazon stock.

How the stock market reacted

Amazon’s share price was down 2% on Monday following the news. Wall Street reacted similarly to the first round of layoffs, with shares falling 0.79% after the November 2022 announcement.

But investors haven’t turned their noses up at every cost-saving measure Amazon has made. The company had already confirmed earlier this month it would also pause the second part of its Arlington, Virginia HQ development indefinitely; Amazon’s share price climbed 3% at the news.

So, why is Wall Street so glum about Amazon’s layoffs when other Big Tech companies have enjoyed stock price increases?

The quarterly earnings reports have been a critical factor in how investors receive job cuts news. The picture has looked gloomy for Amazon recently: its Q4 earnings showed a $2.7bn full-year net loss.

Meanwhile, the AWS arm of the business failed to hit Wall Street expectations, only reporting $21.3bn in sales as opposed to the anticipated $21.76bn.

Looking at these numbers, paired with layoffs, can give more clues as to whether a Big Tech giant is making job cuts to run more efficiently or if it’s faltering under the economic downturn.

The departments Amazon is cutting jobs in is therefore an area of concern. It’s axing more corporate roles than in its last layoff round, with its Amazon Web Services and advertising departments at risk. These are both growth areas for Amazon: ads create $38bn in revenue for the conglomerate, while AWS generated $80bn in net sales for 2022.

As a result, some of Amazon’s competitors in the cloud industry have also taken a small hit. Microsoft stock was down 2.58% and Google briefly slipped to a low of nearly 1% on Monday.

Wall Street is jumpier than a cat on a hot tin roof right now.

Big Tech’s layoffs season continues

Amazon’s second round of mass layoffs is a grim milestone for the tech industry, which has suffered heavy losses in recent months. The layoffs.fyi counter, which has become an unfortunate staple in tracking the broader tech sector’s job cuts, is now at 139,165 for the year.

The difference is stark if we compare Amazon’s announcement and stock performance to another company. Meta has also announced a second round of mass layoffs in the last week, totalling 10,000 roles, as part of CEO Mark Zuckerberg’s ‘year of efficiency’. Meta’s stock price subsequently jumped 7% at the announcement.

The reason Meta has become the darling of mass tech layoffs is again linked to its latest earnings report which was released back in February. Its Q4 revenue figure of $32bn, despite being 4% down from the previous year, surpassed investor expectations. Daily and monthly user figures also increased, indicating more robust ad performance.

Even though it was a mixed bag for Meta, and we await its next earnings release in May, the right numbers were enough on track for the to climb 54% since the start of the year. Mass layoffs will never be good news, but Meta has made the most of it while Amazon’s share price has dipped.

What else could be affecting Amazon’s stock price?

News also emerged on Monday that the Biden administration could soon be moving forward with three of its open FTC investigations against Amazon’s business practices. The FTC will examine its dominance over the online marketplace and privacy violations from its Ring camera product and Alexa assistant.

Other tech companies aren’t immune from regulatory scrutiny – Microsoft, Google and Apple have all had recent run-ins with the FTC and Justice Department – but Amazon has been in the FTC’s crosshairs ever since the Trump administration.

Three FTC investigations levied against Amazon could spell bad news for the stock press – especially amid sluggish online sales and slow growth. It’s a slow-brewing issue for Amazon, but a rumor that didn’t help their share price given the layoffs news.

The bottom line

Even though Wall Street is jittery about tech stocks, how Amazon and Meta’s layoffs announcements were received shows the power of a good earnings report spin. Focus on the right numbers can shield a company’s stock from further hits for a few months – and even raise the price.

Unfortunately, tech sector workers likely haven’t seen the last of job losses and uncertainty, while investors will continue to fret over the slightest bit of bad news. Only those with the strongest stomachs will be ready for the continuing rollercoaster ride in Big Tech stock prices.

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