Amazon Surges Back

Amazon.com Inc. reported surging growth as it rebounded from stagnant sales after a postpandemic slowdown, with stronger-than-expected performances in its cloud-computing and advertising businesses that were greeted warmly by investors.

The Wall Street Journal reports Amazon’s first-quarter sales increased 9% from a year earlier to $127.4 billion, beating Wall Street projections. It posted $3.2 billion in profit for the period, almost 50% higher than analysts expected.

Amazon has made efforts in recent months to reduce costs and focus on profitability. The company said it would finish laying off roughly 9,000 corporate employees by the end of this month after cutting about 18,000 workers in an earlier round of layoffs. Affected units have included cloud-computing unit AWS, advertising, streaming-unit Twitch and other areas. Amazon’s job reductions also have targeted unprofitable divisions such as its devices business and the company has shut down certain projects.

In March, it disclosed it had paused construction on a large corporate real-estate project near Washington, D.C., known as HQ2. On Wednesday, the company said it was winding down its health-focused Halo division and discontinuing products that include its fitness tracker. 

From the fourth quarter through the first quarter, Amazon reduced its global head count by 10% to roughly 1.46 million employees.

In a call with reporters Thursday, Amazon Chief Financial Officer Brian Olsavsky said the company’s international and advertising businesses gained strength during the period. Beyond layoffs, Amazon has been able to save costs through its package fulfillment network, which he said has stabilized following a period of high growth driven by higher demand during the pandemic.

In a recent letter to shareholders, Amazon Chief Executive Andy Jassy acknowledged that the company has faced one of its toughest challenges in recent memory but said executives are focused on investing in long-term projects, and that he remains optimistic about the future.

AWS has faced particular challenges. Year-over-year sales growth at the unit slowed to 15.8% in the first quarter, which was slightly higher than expectations but also was the lowest increase since Amazon began separating out the unit’s performance in 2015. The company’s advertising business, which also has expanded quickly, grew by 21%, compared with 23% a year ago.

Jassy in his shareholder letter said AWS faces “short-term headwinds right now” due to companies spending more cautiously on cloud services because of economic recession fears.

Slow growth has also affected the company’s e-commerce services. Sales for Amazon’s online stores segment, which includes product sales primarily on its flagship site and digital media content, has been decreasing.