Correspondent in Washington
The encouraging quarterly results announced by Amazon on Thursday evening show that Andy Jassy's strategy is bearing fruit. Boss of the Seattle giant since July 2021, Jeff Bezos' former right-hand man is correcting errors that plagued Amazon's performance last year.
Cost reductions, workforce reductions and the development of services with higher margins than the sale of products ordered over the internet, allow Amazon to more than quadruple its operating profit in the third quarter: analysts expected 7, 7 billion dollars, while the group generates a result of 11.2 billion dollars. At the same time, Amazon's turnover climbed 13% to reach more than $143 billion.
To lower costs, Andy Jassy has for the first time since 2015 reduced marketing expenses. It has limited spending on technology and infrastructure by a quarter, a category which includes the salaries of engineers and the cost of servers for the “cloud” services subsidiary, Amazon Web Services (AWS). In North America, 27,000 white-collar positions have been eliminated compared to last year. The organization of Amazon's gigantic distribution network has also been reviewed in order to reduce costs while getting closer to the customer with a view to speeding up the delivery of their orders. A large part of the excesses resulting from colossal investments made during the pandemic now seem to have been erased.
Also readRobots, AI, drones… Amazon is innovating at all costs to deliver faster
Amazon's greatest recent success remains the development of a major new activity which places the online commerce leader in head-to-head competition with Google and Meta Platforms: digital advertising. The division's quarterly turnover jumped 26% from July to September and reached almost 12 billion dollars. Analysts' expectations on this aspect have been shattered. Companies that sell their products on the Amazon platform are spending more and more to improve the visibility of their offers.
AWS also continues to be the driving force of the group. The subsidiary from which Andy Jassy comes, generates almost 30% increase in its operating profit, which exceeds analysts' estimates. These profits reached $7 billion during the quarter, or 62% of Amazon's overall profit. We are certainly seeing a slowdown in AWS revenue growth to 12%. However, it is more difficult to maintain very strong growth when we reach a threshold of $23 billion in quarterly business volume.
Some conclude that AWS, a pioneer in the cloud, is gradually ceding market share to its rivals like Microsoft. Andy Jassy wanted to be reassuring. “The rate and volume of new contracts signed are increasing,” he explains. These new transactions should be visible in the fourth quarter results. However, allusions to cost reductions from AWS customers, often young companies, confirm the mixed indications given a few days earlier by Google on this IT services market. Wall Street has since harshly punished the slowdown in Google's growth in the cloud, announced Tuesday evening, also dragging down Amazon's share price. The share's rebound of more than 5% on Thursday evening, on the over-the-counter market after the Nasdaq closed, was facilitated by this.
The fourth quarter is always the busiest time for Amazon due to holiday shopping. The online commerce giant plans to hire 250,000 people on a temporary basis to cope with the influx of orders. Across all sectors, Amazon anticipates between $160 and $170 billion in revenue from October to December, which is a little less than analysts' forecasts.