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Amazon estimates that AWS’ operating profit could hit Zero next quarter due to tough tech climate

Amazon warned that as the state of the global tech industry deteriorates and consumer spending declines, its quarterly profit may reach zero. In a statement released alongside the company’s financial results for the three months ending December 31, 2022, CEO Andy Jassy said: “In the short term, we face an uncertain environment, but we remain pretty enthusiastic about the long-term potential for Amazon.” Profit for the California-based company decreased significantly from $14.3 billion in the same period last year to $300 million this year. A $2.3 billion write-down of the valuation of its stock stake in electric vehicle startup Rivian Automotive hurt the company’s bottom line.

Although Amazon’s entire revenue increased 9% to $149.2 billion in the fourth quarter of 2022, this was better than projected. Amazon Web Services (AWS), the company’s cloud computing division, continued to perform well in the fourth quarter, with net revenues rising 20% to $21.4 billion from the same period last year. Amazon stated that it anticipates sales for the current quarter to range between $121 billion and $126 billion. It also anticipates that due to the challenging financial environment and consumers’ cautious buying habits, the growth in the cloud computing sector would decrease over the coming quarters.

In the last quarter, the company let go of more than 18,000 employees alongside other Big Tech peers Facebook and Google. “As we consider the ongoing uncertainties of the macroeconomic environment, this led us to the difficult decision to eliminate just over 18,000 roles, primarily impacting our stores and device businesses as well as our human resources teams. As a result, we recorded an estimated severance cost of $640 million,” Chief Financial Officer Brian Olsavsky, said during the earnings call.

None of the three major tech firms—Apple, Amazon, and Alphabet—delivered impressive results for the past quarter. Results were released the day after Meta, the company that owns Facebook, reported better-than-anticipated fourth-quarter revenue and planned a $40 billion stock repurchase, which caused its stocks to soar.

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