Amazons AI Boom UPs Profits, But 14,000 Are Axed

Amazon has reported its strongest cloud growth in nearly three years, powered by surging demand for artificial intelligence services. Yet, even as profits and share prices climb, the company is cutting 14,000 corporate jobs, a move executives say will allow it to fund record capital spending on data centres and chips.

The twin announcements capture Amazon’s balancing act: riding the AI wave that has transformed its fortunes while stripping back bureaucracy to sustain that growth.

AI fuels record cloud performance

Amazon Web Services (AWS), the world’s largest cloud provider, saw quarterly sales rise 20 per cent to $33 billion, easily beating analyst forecasts. The performance marked AWS’s fastest expansion since 2022 and helped lift Amazon’s total revenue by 13 per cent to $180.2 billion for the three months to the end of September.

Net income surged almost 40 per cent to $21.2 billion, far ahead of Wall Street expectations. The results triggered a 13 per cent rise in the company’s share price in after-hours trading, calming investor concerns that AWS had been losing ground to Microsoft and Google.

Chief executive Andy Jassy said AI-driven demand was reshaping every part of the company. “AWS is growing at a pace we haven’t seen in years,” he said. “We continue to see strong appetite for AI and core infrastructure and are focused on accelerating capacity to meet it.”

The upbeat numbers came only ten days after AWS suffered a major outage that briefly disrupted websites and applications across North America. Despite the incident, customers’ appetite for computing power has continued to surge, underscoring the central role AWS plays in the global AI build-out.

A trillion-dollar arms race in computing power

Amazon has been racing alongside Microsoft, Google and Oracle to build and secure the infrastructure underpinning the next generation of AI models. The company is both a key supplier to and a major investor in Anthropic, the developer of the Claude chatbot, while also constructing new data facilities to host the start-up’s expanding workloads.

To meet demand, Amazon has added more than 3.8 gigawatts of computing capacity over the past year and lifted quarterly capital expenditure to $34.2 billion, above analyst estimates. The company expects to spend close to $100 billion on infrastructure in 2025, primarily on AI-focused data centres and chip manufacturing.

Across the technology sector, investment has hit record levels. Combined spending by Amazon, Microsoft, Google and Meta reached $112 billion in the latest quarter alone. Much of this has gone into power-hungry data campuses and advanced processors capable of training large AI models.

The paradox of growth and cuts

The surge in spending has forced Amazon to make difficult choices elsewhere. Earlier this week, the company announced plans to lay off 14,000 corporate employees, roughly 4 per cent of its office-based workforce, as part of a restructuring aimed at making operations “leaner and faster.”

Beth Galetti, a senior vice president overseeing the cuts, told staff the business must be “organised more leanly, with fewer layers and more ownership, to move as quickly as possible for our customers and business.”

The move follows an earlier round of layoffs in 2022 that eliminated 27,000 roles. Together, they reflect Jassy’s push to reshape Amazon’s corporate structure since taking over from founder Jeff Bezos three years ago.

Executives insist the job losses are not directly caused by AI automation but by a need to redirect resources. “Not right now, at least,” Jassy told analysts when asked whether AI was replacing staff. He said the company’s goal was to operate “like the world’s largest start-up”, nimble enough to invest aggressively while maintaining discipline on costs.

Analysts see the cuts as part of a wider recalibration rather than retrenchment. “AI infrastructure is consuming enormous capital, and Amazon is determined to stay ahead,” said Brian Nowak, an analyst at Morgan Stanley. “These redundancies are the trade-off for keeping that investment machine running.”

Balancing growth, efficiency and competition

The expansion of AWS remains the cornerstone of Amazon’s profitability. The division accounts for most of the group’s operating income, funding investments in retail, logistics and advertising. Its resilience also allows Amazon to maintain its aggressive capital expenditure strategy without jeopardising earnings.

Even so, the company is confronting the same margin pressures as its peers. AI projects are expensive to scale, requiring custom chips, vast energy consumption and a complex supply chain of servers and networking equipment. Amazon’s in-house Trainium chips and partnerships with Nvidia, Broadcom and AMD are designed to bring costs down, but those savings will take time to materialise.

Meanwhile, the company’s retail operations continue to perform strongly, with record revenue during its July Prime Day promotion. Amazon expects fourth-quarter sales between $206 billion and $213 billion, a 10 to 13 per cent increase year-on-year, supported by festive spending and sustained e-commerce growth.

Reshaping for an AI-first future

Amazon’s latest moves underline how the company is reshaping itself around artificial intelligence. It is spending more, building faster, and cutting back on layers of management that executives view as obstacles to innovation.

For investors, the combination of rising profits and tighter efficiency has proved reassuring. For employees, the transformation means uncertainty as AI shifts from a tool of growth to a driver of structural change across the organisation.

Jassy framed the moment as one of reinvention. “We’re in the middle of one of the biggest technological transformations in history,” he said. “Our job is to make sure Amazon stays ahead of it.”