Amazon's Profit Climbs as Cost Cutting Bears Fruit

Amazon announced its first quarter earnings this week, beating analyst expectations across the board and delivering a record first quarter profit of $10.4 billion. The record profit was largely driven by the company's rigorous cost cutting efforts of the past two years, which enabled it to grow its operating margin into double digits for the first time ever last quarter.

Since taking over from founder Jeff Bezos in 2021, Amazon CEO Andy Jassy has made cost control one of his priorities and the latest results are a testament to those efforts. The company, still one of the largest employers in the world, has cut 27,000 jobs since late 2022, with the latest round of layoffs announced as recently as early April 2024, when hundreds of jobs at its cloud arm AWS were cut. Moreover, Amazon has worked on further regionalizing its logistics network to reduce delivery times and shipping costs, resulting in higher margins in its core e-commerce business.

Another driver of Amazon's improved operating margin is the fact that its higher-margin businesses, i.e. AWS, digital subscriptions and advertising, are growing faster than the traditionally lower-margin online and offline retail segments.