Amazon is at the crossroads as it looks to cut costs

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Amazon is at the crossroads as it looks to cut costs

Amazon's AMZN is at a crossroads. After years of no-expense spared growth, the company has slashed costs wherever it can, according to CFRA Research Senior Equity Analyst Arun Sundaram, told Yahoo Finance Live on Tuesday.

The strategy is changing under CEO Andy Jassy's leadership, Sundaram said. It was previously a grow at all costs'' model, but now the strategy has shifted to a more profitable rate model, and that is exactly what we are seeing today. The new round of layoffs this week is expected to affect 9,000 of the company's employees. That brings Amazon's total layoff count to 27,000, about 8% of its corporate workforce, which was 330,000 strong last year.

It's not the only place where Amazon is looking to make up for a business as sprawling as Amazon's, the reality is that there are a lot of potentially-cuttable areas.

Sundaram said that they are also cutting some of their unprofitable businesses. We heard the announcement that they are suspending the construction of their headquarters here in Virginia. They are looking at every nook and cranny to try to improve efficiencies and try to become profitable. Some of the areas that are getting diced are Twitch, which Amazon acquired for $970 million in 2014, and Amazon Web Services, or AWS. The AWS cuts are both unsurprising and memorable. AWS has led the way for Amazon financially because of the company's massive revenue-generating cloud business. The growth of the cloud giant has been slowing down, and AWS missed revenue estimates were a blow, coming in at $21.3 billion versus the expected $21.76 billion in Q 4 2022. That slowdown has put Amazon in the difficult position of not only having to make cuts there, but also at the company across the board.

Even though Amazon has grew massively over the past few years, they haven't been able to grow profitably, said Sundaram. The last time their international business posted a profit was Q 3 of 2021, the last time their international business posted a profit was Q 2 of 2021. It's been a few years since Amazon has been profitable in those businesses. He said it all goes back to AWS.

Sundaram told Yahoo Finance that it was AWS that had lifted Amazon over the past few years, but now we're seeing AWS growth slow. That's why these tough decisions have to be made. Sundaram said more job cuts could still be on the table at Amazon, and in e-commerce more broadly.

He said that there could be more waves of cuts, especially if the macro environment continues to go south.

Allie Garfinkle is a senior tech reporter at Yahoo Finance.