Amazon CFO says tech big is getting ready for ‘what might be a slower progress interval’

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Amazon founder and chairman Jeff Bezos last week issued a warning sign of sorts, tweeting that “the probabilities in this economy tell you to batten down the hatches.”

It seems Amazon is following that mantra to some extent with ongoing inflation and recessionary fears.

Speaking to reporters following Amazon’s third quarter earnings report— which sent shares falling about 20% after fourth quarter guidance missed estimates — Amazon CFO Brian Olsavsky was asked if he agreed with Bezos’ take.

“As a general rule, Jeff is a brilliant guy, so when he speaks I think most people listen and take that caution,” Olsavsky said.

He added: “We are preparing for what could be a slower growth period.”

Here are some takeaways from the call with Olsavsky:

  • The company saw moderating growth rates from its consumer business as the third quarter progressed, particularly in Europe, as well as increased foreign currency headwinds. That was on top of continued impacts of broad-scale inflation, heightened fuel prices, and higher energy costs.
  • Companies are cutting their spend with Amazon’s cloud and advertising businesses to save money, Olsavsky said.
  • To help mitigate slowing sales and rising expenses, Olsavsky said Amazon is “taking actions to tighten our belt,” including pausing hiring in certain businesses and shutting down products and services. “We’re going to be very careful on our hiring,” he said. Amazon added 21,000 employees in the third quarter — it added 133,000 in the same period last year, and 248,500 in the same period in 2020.
  • Amazon added warehouse space faster than it ultimately needed in response to the challenges of the pandemic. It made improvements in productivity of its fulfillment and transportation networks during the third quarter, but “not quite as much as we planned,” Olsavsky said.
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Amazon met expectations for third quarter revenue, reporting $127.1 billion, up 15% year-over-year. It reported a net income of $2.9 billion, or $0.28 per share, which beat expectations.

But its fourth quarter guidance came in lower than expected at $140 to $148 billion, compared to estimates of $155 billion. Operating income is expected to be between $0 and $4 billion, a wide range that demonstrates the broader economic uncertainty.

“There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets,” Amazon CEO Andy Jassy said in a statement. “What won’t change is our maniacal focus on the customer experience, and we feel confident that we’re ready to deliver a great experience for customers this holiday shopping season.”

Amazon shares are down more than 30% this year, underperforming the S&P 500 index by more than 10%.

Amazon is among a flock of tech giants that saw business surge during the pandemic but have seen their stock prices drop dramatically this year amid the macroeconomic headwinds. Microsoft reported its slowest revenue growth in five years this week and Meta shares dropped after missing earnings expectations.

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