Amazon stock price drops as recession fears rise
Amazon’s stock price fell 20% on Thursday afternoon after the tech giant provided weak guidance for the holiday quarter. The company’s chief financial officer said Amazon was trying to cut costs because he saw signs that business customers and consumers were watching their spending.
“We’re taking steps to tighten our belts,” Brian Olsavsky, Amazon’s chief financial officer, said on a call with reporters Thursday.
Amazon said in its press release that it expects to generate $140 billion to $148 billion in revenue in the last quarter of 2022, disappointing Wall Street stock analysts who expected revenue projections of around $155 billion. billions of dollars. Sales growth for Amazon Web Services’ highly profitable cloud computing unit slowed in the third quarter as business customers sought to cut spending – “I think every business is trying to save money.” money,” Olsavsky said — and Amazon’s core retail business softened as consumers started spending. less, especially in Europe.
“Europe was weaker than North America, although we are seeing the impact of consumers tightening their belts globally a bit,” Olsavsky said. He referred to entering a period of “uncharted waters”, with tight budgets, still high inflation and high energy costs.
Warnings from a senior executive at one of the world’s most valuable companies and America’s largest employers, coupled with weaker-than-expected holiday forecasts, could be a sign that the worst days of the current economic downturn are still ahead of us. And that should worry everyone, whether it’s an Amazon fan or a critic who doesn’t want the company to succeed.
And it’s not just Amazon. Other tech companies have recently provided similarly worrying signals. Both Google and Microsoft told investors this week they would slow hiring, and Amazon said earlier this month it would freeze hiring in its core retail business, which is its business unit. the most mature but also the one with the slowest growth and the least profitable.
Similar to Amazon, Microsoft reported on Wall Street this week that business customers of its Azure cloud computing business were looking to cut spending, signaling a wider belt tightening in the corporate world. And if labor-intensive medium and large businesses brace for a worsening economic climate, that could be a sign that more people are at risk of losing their jobs and smaller businesses on less stable foundations might have a difficult road to travel.
Silicon Valley also faces problems in the advertising business, which is a massive source of revenue for major tech companies. Amazon, Google and Facebook – the three largest advertising sales companies in the United States – also revealed slowdowns in their advertising activities. Part of this is due to changes to privacy controls that Apple began offering iPhone users last year, which may make it more difficult for marketers using the tech giants’ advertising tools to target these users with advertisements.
But that’s not the whole story. Amazon’s advertising business is largely insulated from Apple’s privacy changes, but the company’s chief financial officer said the division is still seeing weakening demand from consumer brands and merchants looking to market their products. products to Amazon customers, with those advertisers spending less per digital ad impression. Amazon’s ad revenue was up another 30% in the third quarter, but that’s down from 52% in the same period in 2021.
“We are preparing for what could be a period of slower growth, like most companies,” Olsavsky said.
And if tech giants like Amazon, which once seemed invincible amid record sales and profits boosted by the early days of the pandemic, brace for a worsening economy, the rest of us probably should. do too.