E-commerce giant has been trying to cut costs, including through layoffs.
Amazon.com Inc. is expected to report its slowest sales growth in more than two decades, with the company’s e-commerce services and cloud-computing business feeling the sting from recession concerns that are denting consumer and enterprise spending.
The company after the closing bell Thursday is expected to post sales of $145.7 billion, which would represent 6% growth from the year-ago period, according to analysts surveyed by FactSet. Wall Street is forecasting that revenue for the company’s online-stores segment, which includes product sales primarily on its flagship site and digital media content, will contract by little over a 1%.
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.
Chief Executive Andy Jassy has been trying to reposition the company for about a year. Early in 2022, Amazon closed its physical bookstores and specialty stores and moved to rein in capital expenses by slowing openings of new warehouses. Last month, the company said it would lay off more than 18,000 corporate employees. The company’s workforce had swelled by 800,000 employees, mostly at its hundreds of warehouses, between the end of 2019 and end of 2021.
Amazon shares fell about 50% last year, losing more than $830 billion in market valuation. The stock has recovered somewhat this year, with shares up 25% through Wednesday’s close.
“The company is taking steps to control its costs and to defend the bottom line,” said Mark Mahaney, an analyst at investment firm Evercore ISI. Recent expectations for Amazon have been low because of the signals it and other companies have sent about slower growth in online retail and cloud computing, Mr. Mahaney said.
Amazon is expected to post a net profit of roughly $2 billion, compared with $14.3 billion in the year-ago period when the company booked a nearly $12 billion gain from its investment in electric-vehicle maker Rivian Automotive Inc.
Amazon has long relied on its cloud-computing arm, called Amazon Web Services, as its profit engine, especially when its e-commerce sales have disappointed. But AWS sales growth has also slowed recently, and Amazon executives have said cloud-computing customers have looked to reduce their spending.
The company’s 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, meanwhile, has been expanding rapidly and become an increasingly meaningful sales-driver. The segment has grown by double-digit rates, increasing by 25% in the third quarter.
As part of Mr. Jassy’s drive to cut costs, Amazon has moved to wind down certain projects outside of its core products. That has included its Amazon Care telehealth unit and AmazonSmile charitable program. The company also recently raised the price minimum for free grocery delivery from Amazon Fresh from $35 to $150.
The company also continues to face scrutiny in how it manages its workforce. The Labor Department’s Occupational Safety and Health Administration has recently cited Amazon for safety violations at six of its warehouses as part of a broad review of its workplace practices. Workers have had to perform tasks that could lead to lower back injuries and other muscle-related conditions, the agency said. The government’s inspections found that sites’ medical clinics were understaffed or contained personnel that were inadequately trained.
Amazon said that the citations didn’t reflect the reality of safety at its sites and that the majority of employees tell the company they feel their workplace is safe.