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Is Amazon’s Slowdown a Warning?

February 3, 2023 By The Editors

WASHINGTON – Deputy Secretary of Homeland Security Alejandro Mayorkas and Director of U.S. Citizenship and Immigration Services León Rodríguez naturalize 20 new U.S. Citizens in a Naturalization Ceremony held at the Smithsonian’s National Museum of American History in Washington, D.C., June 14, 2016. During the ceremony, Army Spc. Jae Seon Shim, led the Pledge of Allegiance, and Jeff Bezos, founder and CEO of Amazon.com was awarded the James Smithson Bicentennial medal. Official DHS photo by Barry Bahler.

Is the slowdown in growth at Amazon a warning for the wider economy? Sebastian Herrera reports for The Wall Street Journal:

The online retail giant posted fourth-quarter sales of $149.2 billion, or 9% growth from the year-ago period, beating Wall Street expectations. The top line benefited from a second Prime Day Amazon held following one in July. Those events that typically feature discounts to lure shoppers have generally boosted sales. Amazon said it had the largest Thanksgiving weekend shopping weekend in its history but provided little detail.

Still, sales at the company’s online-stores segment, which includes product sales primarily on its flagship site and digital media content, fell by 2%

Amazon has long relied on its cloud-computing arm, called Amazon Web Services, as a driver of profit, especially when the retail operations are struggling. But AWS sales growth slowed to 20% in the most-recent quarter, the lowest growth rate since Amazon began to report the segment. Operating income for AWS in the most recent quarter came in 9% below Wall Street estimates.

Mr. Olsavsky said the company has seen a continued slowdown in AWS spending in the current quarter to the mid-teen growth rate as customers have looked to rein in costs. AWS will likely experience challenges “in at least the next couple of quarters,” he added.

Amazon, like its customers, is looking for ways to rein in costs, Mr. Olsavsky said.

Cloud-computing rivals have been grappling with a similar slowdown. Microsoft Corp. in late January reported its slowest sales growth in more than six years as demand for its software and cloud services cooled.

Amazon’s advertising business, which has become an increasingly meaningful sales driver, also saw a slowdown in the fourth quarter, recording a 19% increase in sales.

Amazon is enduring one of its most difficult stretches in its history as it resets its business from the Covid boom period that, executives have said, caused it to expand aggressively. The company’s operating expenses in North America have outpaced sales during the first three quarters of 2022, though the company narrowed the gap in the fourth quarter.

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