Amazon’s stock fell as much as 20% Thursday afternoon after it announced a weak forecast for the holiday quarter. The company’s chief financial officer said Amazon is trying to cut costs as there are signs that both business and consumer customers are paying attention to their spending.
“We are taking action to tighten our belts,” Amazon Chief Financial Officer Brian Olsavsky said at a press conference on Thursday.
In its earnings call, Amazon said it expects to generate between $140 billion and $148 billion in revenue in the final quarter of 2022, beating Wall Street stock analysts who had expected revenue projections of about $155 billion. Disappointed. Sales growth for Amazon’s highly profitable Amazon Web Services cloud computing unit slowed in the third quarter. Because corporate customers tried to cut spending. “I think all companies are trying to save money,” he said Olsavsky. Less, especially in Europe.
“Europe was weaker than North America, although we’re seeing the effects of consumers tightening their belts a bit globally,” Olsavsky said. He said that we have entered an era of “unknown seas.”
A word of caution from the management of one of the world’s most valuable companies and the largest employer in the US, coupled with weaker-than-expected holiday forecasts, is the worst day of the current economic slowdown. may indicate that is still ahead. Whether you’re an Amazon fan or a critic who doesn’t want Amazon to succeed, it worries everyone.
And it’s not just Amazon. Other tech companies have shown similar ominous signs recently. Google and Microsoft this week told investors they would delay hiring. Earlier this month, Amazon said it would freeze hiring in its most mature business unit, but its slowest growing and least profitable core retail business.
Like Amazon, Microsoft reported to Wall Street this week that corporate customers of its Azure cloud computing business are looking to cut spending, signaling a broader belt tightening in the corporate world. And when medium- and large-sized companies with large workforces prepare for a downturn in economic conditions, it could indicate that more people are at risk of losing their jobs. and the prospects for SMEs without a stable foothold can be bleak.
Silicon Valley also has problems with its advertising business, which is a huge source of income for big tech companies. His three largest ad sellers in the US, Amazon, Google and Facebook, also revealed a slowdown in their advertising business. Part of that is due to changes to the privacy he controls that Apple began offering to iPhone users last year, allowing marketers using the tech giant’s advertising tools to target those users with their ads. can become difficult.
But that’s not all. Amazon’s advertising business has been largely unaffected by Apple’s privacy changes, but Amazon’s CFO said demand from consumer brands and merchants looking to sell their products to Amazon customers is still weak. He said these advertisers are spending less per impression on digital ads. Amazon’s ad revenue was up 30% in the third quarter, but down from 52% in the same period in 2021.
“We, like most companies, are preparing for periods when growth may slow,” said Olsavsky.
And amid record sales and profits in the early days of the pandemic, if tech giants like Amazon, once seemingly invincible, are bracing for an economic downturn, perhaps we should also do so.
