Amazon has officially kicked off the previously announced 9,000 layoffs, which made headlines in March.
While those inside the company have known this was coming, no one knew when the internal memo would start circulation. Today, employees started getting notified of the job cuts—many of which are within the flagship Amazon Web Services (AWS) division, which has reportedly caused concern among employees.
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Internal memo announces layoffs at AWS
Amazon Web Services, the company’s cloud division, is a massive profit center for the company. Most employees working with this part of the business likely would have felt relatively safe, given that the majority of previous layoffs have been limited to fringe areas of the company such as their gaming and Echo departments.
But now it appears that the fallout from the current economic climate has spread.
The memo has reportedly stated that job losses at AWS will be spread globally, with the U.S., Canada and Costa Rica the first regions to be impacted today. Other regions are expected to be impacted, but local labor laws make this a more drawn out process.
“As you know, we recently made the difficult decision to eliminate some roles across Amazon globally, including within AWS,” Amazon Web Services CEO Adam Selipsky, shared in an internal memo obtained by CNBC this morning. “I wanted to let you know that conversations with impacted AWS employees started today.”
The package for these employees includes a separation payment, transitional health insurance benefits and external job placement support.
“Given [our] rapid growth, as well as the overall business and macroeconomic climate, it is critical that we focus on identifying and putting our resources behind our top priorities—those things that matter most to customers and that will move the needle for our business,” the memo continues. “In many cases this means team members are shifting the projects, initiatives or teams on which they work; however, in other cases it has resulted in these role eliminations.”
The memo assures employees that “the fundamentals and the outlook” for Amazon business are “strong,” and they are focused on continuing innovation.
PXT (People eXperience & Tech) senior vice president Beth Galetti also shared a memo to the PXT team.
“These decisions are not taken lightly, and I recognize the impact it will have across both those transitioning out of the company as well as our colleagues who remain,” she reportedly wrote in the memo. “To those leaving, I want to say thank you for your contributions. You’ve helped build Amazon into the extraordinary company it is today, and we are here to support you during this difficult time.”
The concern for investors
AWS is a major cash cow for Amazon, generating 74% of the companies operating profit in 2021. The concern from employees in receipt of the internal memo is that if Amazon is laying off staff in the most profitable part of the company, leaders but be concerned.
For investors, this could go either way. On one hand, cutting costs is usually perceived as a positive for the market. We’ve seen this play out with tech stocks like Meta bouncing off layoff announcements earlier in the year.
But, that’s on the expectation of improving overall financial results. If the layoffs are perceived as a way to try to save the bottom line over major economic or company concerns, that sentiment is likely to trump any short term salary reduction benefits.
The bottom line
It’s a sign that there may still be bad news to come before we see a turnaround in big tech. The news of further layoffs, particularly in a blue chip sector like AWS, means that more and more jobs could be on the line.
As to what that means for the stock, we’ll have to wait and see. As of right now the markets appear to be responding positively, with Amazon stock price up 2.6%.
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