Cutting Down The Amazon

What’s going on?

Big Tech’s break rooms keep getting barer and barer, with first Meta and now Amazon axing even more employees.

What does this mean?

Cutting costs is a bit like going on a health kick: painful at the beginning, but surprisingly easy once you get into the swing of it. And since Big Tech never really had to tighten its belt before, it’s no surprise these titans have discovered a whole treasure trove of cost-saving opportunities now they’ve gone looking for them. Take Amazon: the firm announced it’s laying off 9,000 more employees, bringing the running total to 27,000. And while that sounds like a hefty figure already, “the everything store” could be gearing up for even more as it doubles down on getting into tip-top shape.

Why should I care?

Zooming out: The biggest loser.

Meta’s own fresh layoffs mean it’s leading the sacking pack, with 20% of its total workforce shown the door. But shedding that kind of fat could be tricky for Amazon, which has 800,000 hard-working warehouse employees on its books. Still, imagine that Amazon could pull off axing 20% of its workers – that’s more than 300,000 of them – using, say, robotic technology. That would be bad news for an awful lot of people, of course. But taking the average US salary as a guide, the move could more than double Amazon’s profit margin, currently sitting at less than 3%.

The bigger picture: How slow can you go.

Visions of beefed-up profit margins have got some investors salivating, but they might lose their appetites if Big Tech’s slower sales growth turns into a permanent fixture. See, analysts expect revenues from the likes of Meta and Amazon to speed up next year, and with costs trimmed down, that could cause profit to explode. But if revenue doesn’t accelerate, shareholders could easily dump their shares – or demand even deeper cuts.

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Originally Posted March 21, 2023 – Cutting Down The Amazon