Amazon looks at cutting costs amid recession fears

Investments in Alexa and brick-and-mortar outlets may be affected as tech giant voices concern about “the current macro-environment.” 

Amazon is, of course, not the only tech company making cuts. Just among the giants, Facebook’s parent, Meta, is laying off 11,000 workers and Google has slowed its pace of hiring. Businesses are trying to mitigate risk as they prepare for a continued economic slowdown.

Amazon’s senior leadership team regularly reviews its investment outlook and financial performance, according to a company statement Friday. An excerpt: ”As part of this year’s review, we’re of course taking into account the current macro-environment and considering opportunities to optimize costs.”

All well and good, said Gene Munster at Loup Ventures, a tech investment company. But this time feels a bit different.

“This review has some of their investment areas that have been kind of core to the company over the past five years,” Munster said. “Some of those areas are under more of a microscope, which is different than a typical review.”

Investment areas like the Alexa virtual assistant technology and brick-and-mortar retail outlets. 

But Brendan Witcher, a principal analyst at Forrester, said the story isn’t just about Amazon trying to cut costs.

“The story is more about: Watch how they cost cut and watch how it’ll likely be probably more lightweight than you would expect,” he said.

Witcher said historically, Amazon has been good about not overcutting, whether it’s investment or jobs. That’s because, he said, the company understands that it’s so big, cuts in one area will almost certainly affect others.

It’s clear that Amazon and its peers are trying to adjust to a more difficult environment in the tech industry.

“I think the clock has struck midnight for Big Tech in terms of hypergrowth,” said Dan Ives, a managing director at Wedbush Securities. “It’s not just Amazon. You’re seeing it for Apple, Microsoft, of course, Meta. This is really Amazon being cautious ahead of what looks like a dark storm cloud coming in terms of this recession.”

Which is something shareholders want to hear, according to Arun Sundaram at research firm CFRA.

“Investors want to see companies like Amazon kind of tighten their belt and prepare for slower economic growth in 2023,” he said.

As part of that belt-tightening, Amazon said in August that it would close its telehealth unit, Amazon Care. 

And just last week, the company announced a hiring freeze across its corporate workforce.