Amazon’s fourth quarter earnings report due out Thursday afternoon will reveal how the Seattle tech giant performed during its holiday quarter amid various headwinds.
Amazon’s stock dipped nearly 20% following its third quarter earnings report in October when it provided lower-than-expected guidance. “We are preparing for what could be a slower growth period,” Amazon CFO Brian Olsavsky told analysts on Oct. 27.
Amazon is expected to report revenue of $145 billion, up from $137.4 billion in the year-ago period, and earnings per share of $0.17 for the December quarter.
After a period of pandemic-driven meteoric growth, the company’s stock slid more than 30% last year amid rising inflation, recessionary fears, higher energy costs, and supply chain woes. The return to in-person shopping and slowing consumer spending isn’t helping Amazon, either.
To help mitigate slowing sales and rising expenses, Olsavsky said Amazon was “taking actions to tighten our belt,” including pausing hiring in certain businesses and shutting down products and services.
Amazon later announced in January that it was laying off 18,000 workers, or about 5% of its corporate headcount. It’s the largest layoff in Amazon’s history and, in raw numbers, the biggest by any tech company in the past year. Many other tech companies have also cut jobs amid the broader tech downturn.
“We’re going to be very careful on our hiring,” Olsavsky said in October.
Amazon’s headcount grew by 21,000 employees during the third quarter, which pales in comparison to the same period in 2021, when Amazon added 133,000 workers, and in 2020, when it added 248,500 people. The recent layoffs did not impact Amazon’s warehouse workers.
Amazon also added warehouse space faster than it ultimately needed in response to the challenges of the pandemic. It made improvements in productivity of its fulfillment and transportation networks during the third quarter, but “not quite as much as we planned,” Olsavsky said.
Over the past year Amazon has trimmed back and eliminated products, services, and entire businesses: its Scout neighborhood delivery robots, its Amazon Care primary healthcare business, bricks-and-mortar Amazon bookstores, the AmazonSmile charity program, and others.
In a report last week, analysts at Wedbush wrote that “we believe this response is partially due to a bloated cost structure that may be further tested by a worsening macroeconomic atmosphere and rising expenses from inflationary pressure, leading to conservative guidance.”
However, the analysts said the cost discipline could “drive profit growth.” Wedbush maintained its outperform rating for Amazon’s stock and estimates shares to rise by 40% in the next 12 months.
Analysts will be watching for any slowdown in Amazon’s cloud business, which typically helps drive its profit and boost the bottom line. Olsavsky said in October that companies were cutting their spend with Amazon Web Services.
Microsoft said it saw “moderated consumption growth” with its cloud platform in the most recent quarter, but last week it still reported cloud revenue increase that was “better than feared,” according to Wedbush analyst Dan Ives.