Amazon's cost focus continues amid AI boom
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Illustration: Rebecca Zisser/Axios
Amazon CEO Andy Jassy's cost-cutting projects have been paying off.
Why it matters: The company is in the midst of performing a delicate dance between spending growing sums on AI and managing its expenses wherever it can.
Driving the news: Amazon reported on Thursday afternoon that its third quarter operating income grew to $17.4 billion — up about 55.7% from a year ago.
- For context, that figure was $2.5 billion two years ago as major layoffs swept across the company.
Flashback: Amazon and other online retailers saw a dramatic slowdown in consumer spending in 2022 as excess pandemic savings dwindled, inflation and costs rose and economies opened back up.
- As an industry, Big Tech also began to slash jobs that year to correct pandemic-era hiring surges.
- Specifically, Amazon has made tens of thousands of painful job cuts since 2022.
State of play: Staff efficiency remains a key focus.
- "We're being very measured in our hiring," CFO Brian Olsavsky said on the earnings call, when asked about margin growth in Amazon's cloud business, Amazon Web Services (AWS).
- "Our office staff is down slightly year-over-year, and it's flat to the end of last year," he added.
- Controlled spending overall has slowed total operating expense growth from 17.6% from Q3 2021 to Q3 2022, down to 7.3% from Q3 2023 to Q3 2024.
Between the lines: AWS is one of the most important parts of Amazon's business and its main profit engine.
- This is also where Amazon plans to spend the majority of its roughly $75 billion in capex this year to support AI growth. ("I suspect we'll spend more than that in 2025," Jassy said.)
- As for the retail side of the company, Jassy said Amazon continues to lower its own operating costs so that it can "afford" to lower prices for consumers.
What we're watching: Automation will likely play a key role in helping lower operating costs in fulfillment centers.
