AWS takes a hit in the latest round of Amazon layoffs

by Ana Lopez

When Amazon announced it would be laying off an additional 9,000 employees today, AWS employees were not exempt from Amazon CEO (and former AWS CEO) Andy Jassy announcing that the cloud division would be included in today’s round.

businessupdates.org hears that about 10% of today’s total came from AWS. The company does not want to confirm those figures, but refers to Jassy’s memo to employees published this morning as the core of his statement.

According to that memo, the reason the company is phasing out the layoffs is that some managers were still evaluating their departments and they weren’t ready at the time of the first round. “The short answer is that not all teams finished their analyzes in late fall; and rather than rushing these reviews without due diligence, we chose to share these decisions as we made them so that people got the information as quickly as possible,” Jassy wrote.

Ray Wang, founder and principal analyst at Constellation Research, says Amazon has had to carefully review every aspect of the organization, and AWS was no exception. “This is part of a larger trend where tech companies are getting lean again, and Amazon had been blowing up in recent years. They finally completed their analysis a few weeks ago and now AWS has cuts as well,” he said.

In the company’s most recent profit report early last month, the growth rate of the cloud division dropped to 20%, against growth of more than 39% the previous year. To make matters worse, CFO Brian Olsavsky telegraphed that growth slowed even further. “Looking ahead, we expect these optimization efforts to continue to be a headwind to AWS growth for at least the next couple of quarters. So far in the first month of the year, AWS’s year-over-year revenue growth is in the mid-teens,” he said at the time.

Against that backdrop, the layoffs should come as no surprise. In fact, the cloud infrastructure market in general has experienced slowing growth. After years of runaway numbers, cloud spending is being curtailed and this is starting to have an impact on the market. At the end of the most recent cycle of earnings reports, the cloud infrastructure market overall slowed to growth of 21%, down from 36% growth last year.

In addition, Amazon’s old rival Microsoft gained market share. While Microsoft’s growth also slowed last quarter, the company has been growing faster and is slowly but steadily starting to gain on AWS.

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