Amazon CEO's Cost-Cutting Strategy Boosts Profit Margins To Near-Record Highs

Under the watchful eye of CEO Andy Jassy, Amazon Inc. AMZN has seen its profit margins nearing record highs.

Jassy, who began his role as CEO in mid-2021, has been resolute in his efforts to reduce costs across the company, reported CNBC. Over the past year, he has eliminated 27,000 jobs, cut some risky ventures, and transformed Amazon’s fulfillment network to prioritize speed and efficiency.

Another significant contributor to the earnings spike was the advertising services, which along with AWS, delivers higher profits than core retail. Revenue from advertising services surged 26%, exceeding $12 billion.

Furthermore, cost control measures in “non-people categories” like infrastructure, and a decline in sales and marketing expenditure during the quarter, have also played a crucial role in boosting Amazon’s profits.

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These strategic moves have turned Amazon into a profit machine. The third-quarter earnings report disclosed an operating margin of 7.8%, the highest since it achieved a record of 8.2% in Q1 2021. This is a significant jump from the 2% operating margin reported a year ago.

Jassy’s focus on optimization was apparent during the earnings call, with the term being used numerous times. This was in reference to Amazon’s own cost-cutting initiatives and the efforts by Amazon Web Services (AWS) customers to decrease their cloud bills while maintaining or improving performance.

Despite a slowdown in AWS revenue growth, the optimistic tone of the earnings call pushed Amazon’s stock up by over 5% to $125.98. The company’s net income also saw a substantial increase, tripling to $9.9 billion from $2.9 billion a year earlier.

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