Monday, January 30

Amazon’s sharp adjustment plan has an exception: this division will continue to hire and expand

Amazon has stopped hiring and has launched the largest staff cut in its history. Some 10,000 employees are expected to be laid off in the coming weeks. The adjustment plan, however, will not affect all divisions equally. The company will continue to bet on Amazon Web Services (AWS)hiring more people and investing in building new data centers.

The move, according to Bloomberg, has been revealed by Matt Garman, AWS’s head of sales and marketing. “Our business continues to grow rapidly,” the executive says as he prepares to lead the tech giant’s next wave of hiring. The company had already hired a large share of new employees in the last two years, but is preparing to attract more talent in 2023.

The importance of AWS for Amazon

Amazon has grown so large that the label “e-commerce giant” is too small for it. In fact, it separates its financial results into three segments: North America, International and AWS. The first two comprise the geographic breakdown of your retail, subscription services, and device billings. The latter focuses on his cloud computing service.

Precisely, AWS has long been the engine of Amazon’s profits. Its relevance is such that in certain quarters it has represented all the operating income of the company, and this last quarter has not been the exception. In the results of the third quarter that ended on September 30, the company billed 127.1 billion dollars, 15% more than in the same period of 2021.

However, the company’s profitability fell and net profit fell 9% to 2,872 million dollars, boosting the restructuring plan devised by Andy Jassy. The great savior of the numbers in the red was the AWS segment, whose billing was 20.5 billion dollars and the operating income stood at 5.400 million dollarscompared to 4.9 billion year-on-year.

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But why is AWS growing when all other segments are going backwards? The answer may lie in their services and reputation. It is a platform of choice for millions of customers around the world who need cloud computing services. Instead of investing in their own infrastructure, they can choose to pay to use AWS’s, and more importantly, in a scalable way.

Amazon has distributed its AWS infrastructure in different parts of the world so that the service reaches a good performance in the most distant geographical points. Namely, AWS is at the forefront of cloud computing and owns more than 34% of the market. Among its main competitors we find Microsoft Azure, with 21% of the market, and Google Cloud, with 11%.

Despite this privileged place in the industry, cloud computing is one of the segments that is often targeted when it comes to cutting costs. Netflix, for example, would have considered spending less on the cloud after losing subscribers earlier this year. Elon Musk’s Twitter would also have followed that path to save $1 billion annually.

We use Alexa for little more than setting timers and music.  That's a huge problem for Amazon.

Garman, however, does not see this scenario as a threat to his business. “We will moderate our data center growth when demand moderates,” he said on a call with investors last October. In addition, he pointed out that they have many indicators that give them reasons to continue investing and building data centers, so according to the executive, that is what they will do.

Images: Amazon | Tanner Boriack

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