Amazon Cuts AWS Jobs: What's Next for AMZN Stock?

The Evolution of Amazon Web Services

Cloud computing has long been a cornerstone of big tech, with few companies leveraging it as effectively as Amazon. Its Amazon Web Services (AWS) division began as an internal solution to manage the company’s massive e-commerce operations and has since evolved into a dominant force in enterprise infrastructure. Over the past decade, AWS has become a major driver of Amazon's high-margin growth, solidifying its position as a leader in the cloud market.

However, this growth engine is now undergoing a strategic shift. Recent reports indicate that Amazon has begun cutting jobs within AWS following an internal review of priorities and organizational efficiency. The company clarified that these changes are not due to artificial intelligence (AI) disruption but rather a move to streamline operations and focus on key strategic areas. While Amazon continues to hire in core roles, the layoffs have raised questions about the future direction of AWS.

What Investors Need to Know

For investors, the current situation raises an important question: Is this a warning sign or a buying opportunity? With Amazon set to report earnings on July 31, understanding the implications of these changes is crucial. Amazon's stock has seen mixed performance this year, up about 3.8% year-to-date but underperforming the broader market due to tariff-related challenges and trade tensions. Despite this, the stock has rallied 27.5% from its late-April lows, driven by strong results from Prime Day, increased demand for AWS cloud AI services, and robust advertising revenue.

Amazon's valuation remains at a premium, with a price/sales ratio of 3.50 and a forward price/earnings ratio of 36.85. However, as a member of the Magnificent 7 stocks, Amazon has consistently outperformed the S&P 500 over the last decade. At current levels, the stock trades about 20% below its 5-year average EV/EBITDA and approximately 6% below its all-time high.

Reassessing AWS’s Role

The news that Amazon is cutting AWS jobs may seem concerning, but the details are essential. Reports suggest that hundreds of positions have been eliminated, particularly in training and certification teams. Amazon described the move as a targeted reorganization, emphasizing that the company is focusing on key areas while still maintaining thousands of open roles across AWS. This indicates a reallocation of resources rather than a reduction in the division's size.

In Q1 2025, AWS generated $29.3 billion in revenue, a 17% increase year-over-year. The unit also delivered $11.5 billion in operating profit, a 23% rise compared to the previous year. Analysts estimate that AWS's annualized revenue run-rate is roughly $117 billion, and it holds about 29% of the global cloud-infrastructure market.

The Future of AWS and Amazon Stock

Despite its current success, AWS still has significant growth potential. Amazon CEO Andy Jassy has noted that more than 85% of global IT spending is still on-premises, suggesting a massive untapped market. He predicts that over the next 10–20 years, most workloads will shift to cloud platforms, presenting substantial opportunities for AWS.

Jassy also mentioned that prior to the AI boom, AWS anticipated a "multi-hundred-billion-dollar" revenue run rate. He now believes this figure could be even higher, reinforcing the company's confidence in AWS's long-term potential. As companies adopt AI, big data, and other advanced services, AWS is well-positioned to benefit.

Analyst Perspectives

The consensus among 54 analysts tracking Amazon is a “Strong Buy,” with an average price target of $249.85, implying about 10% upside potential. While the recent job cuts may raise concerns, the underlying fundamentals of AWS remain strong. For investors, the current environment presents an opportunity to evaluate Amazon's strategic moves and consider whether the stock is a compelling buy at its current level.