The season of layoffs continues with one of the tech sector’s biggest names joining the pack. Amazon (NASDAQ:AMZN) has announced that it plans to lay off as many as 10,000 staff members and is implementing a hiring freeze. This puts it in the same category as many of its peers who have responded to the difficult quarter by implementing layoffs.
When Mark Zuckerberg announced that Meta Platforms (NASDAQ:META) would be laying off 11,000 workers, he cited a miscalculation regarding e-commerce demand that caused the company to over-hire. It’s clear now that Meta’s news foreshadowed the Amazon layoffs. Now investors are wondering what it will mean for companies in the e-commerce space in 2023.
Let’s take a closer look at what to expect.
The Amazon Layoffs: What Investors Need to Know
While META initially rose alongside the company’s layoff news, things aren’t going so well for AMZN stock. Shares have dipped almost 2.5% today and look poised to continue falling. This comes after the company enjoyed an impressive bump last week amid a market rally. But now the Amazon layoffs pose some important questions regarding the company’s prospects in the coming year.
Which parts of Amazon will be seeing the reductions? According to the New York Times, the groups most impacted will be devices, retail and human resources. The first division is responsible for Amazon’s Alexa device, along with many of its other technical innovations. As the outlet reports:
“The total number of layoffs remains fluid. But if it stays around 10,000, that would represent roughly 3 percent of Amazon’s corporate employees and less than 1 percent of its global work force of more than 1.5 million, which is primarily composed of hourly workers.”
It’s hardly surprising that Amazon would be resorting to layoffs. The sector leader has seen shares fall more than 42% year-to-date as it has strived to move forward in a post-pandemic economy. Like Meta, though, it may have zealously hired too many people during the e-commerce boom that lasted into 2021. Now that the economy is moving past that pandemic-centric environment, many companies have been forced to trim their staff in order to save face before fourth-quarter earnings.
However, it’s important to pay attention to the timing of this news. The holiday season is quickly approaching, a time during which Amazon typically sees a significant demand. If the company is laying off a large chunk of staff members two weeks before Thanksgiving, it is clearly anticipating an even worse final quarter than it predicted in October. There is clear pressure on companies in Amazon’s space to trim any areas that they can. It all points toward a global economy that is not as friendly toward e-commerce leaders as it has been in years past.
The Bottom Line on AMZN Stock
What does all this mean for Amazon’s growth potential and AMZN stock?
InvestorPlace contributor David Moadel recently predicted that it will return to the Trillion Dollar Club within the next few years. As he sees it, market fundamentals still indicate that AMZN stock will rise again and has plenty of room to grow. While that hypothesis could easily be true, experts also know that layoffs only benefit a stock if the company makes internal changes to accompany them. Investors should be watching closely to see if Amazon makes real operational changes.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
