Amazon job cuts rise to 27,000, but it's still not enough to rightsize the company

Published Mon, Mar 20 20235:24 PM EDTUpdated Tue, Mar 21 20236:18 AM EDT

Amazon 's (AMZN) announcement Monday to eliminate another 9,000 employees in the coming weeks is a step in the right direction. But management has not gone far enough to reduce its bloated workforce and cut costs across the organization. The new Amazon cuts, which bring its recent total to 27,000, follow other tech layoffs. Meta Platforms (META) last week revealed another 10,000 on top of 11,000 in November. Alphabet (GOOGL) cut 12,000 jobs in January, and Microsoft (MSFT) is reducing 10,000 through March 31 . Andy Jassy, CEO of Club holding Amazon, detailed the company's actions in a memo to staff, saying these job cuts will mostly come from its Amazon Web Services (AWS) cloud unit, advertising operations and videogame streaming platform Twitch. That's on top of the 18,000 workers that the tech giant said it would let go in January, which mainly came from Amazon's retail and recruiting operations. "Given the uncertain economy in which we reside, and the uncertainty that exists in the near future, we have chosen to be more streamlined in our costs and headcount," Jassy wrote. Monday's reductions came after the second phase of the company's annual planning process, which wrapped up this month. Jassy added, however, there could be even more cuts because "teams are not yet finished making final decisions on precisely which roles will be impacted." He said he hoped those reviews could be "complete by mid to late April." Amazon's total job cuts thus far are disappointingly low, a drop in the bucket compared to its 1.5 million employees as of the end of 2022. While always terrible when people lose their jobs, the firm's headcount, which spiked to meet surging Covid demand, must now be rightsized as e-commerce returns to more normalized levels in this period of receding pandemic concerns. We'd like to see staff reductions in the neighborhood of 100,000 in the near term, along with plans to downsize warehouse operations and reduce data center space. Jim Cramer has been saying this for months while recognizing that the company needs to figure out which jobs are needed and which ones are not in order to maintain its competitive edge of speedy delivery. The Club's take Amazon has been a holding within Jim Cramer's Charitable Trust since 2018. We bought the stock for its e-commerce and cloud leadership, but we're disappointed of late to see a deceleration in its AWS unit. Jassy has done incredible work in building up AWS as a market leader in cloud computing, but we need to see invigorated operating income and free cash flow growth. And, that means taking action to make a leaner and more efficient enterprise to boost profits. If we don't see significant progress on this front, we aren't incentivized to own the stock. Disappointing fourth-quarter sales growth in its cloud segment comes at a time when AWS is the preferred service provider for many companies around the world. As data management continues to be a top priority for consumers and businesses, Amazon's cloud unit should be well-positioned to get bigger. But to do so, the tech leader must stop sacrificing profits for long-term growth. AMZN .SPX 5Y mountain Amazon (AMZN) vs. S & P 500 (.SPX) 5-year performance In a research note last week, JPMorgan said investor sentiment in Amazon has dropped to near multi-year lows with shares up only 14% over the past three years compared to the S & P 500 , which is up 63% during the same period. While Amazon has underperformed, we're still sticking with the stock because it has way too much potential to stay bogged down for much longer. If Amazon turns into the leaner company we want it to become, the stock could turn higher. (Jim Cramer's Charitable Trust is long AMZN, META, GOOGL, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

The regulator was concerned with Amazon's dual role as both a marketplace and a competitor to merchants selling on its platform.

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