AWS takes a hit in latest round of Amazon layoffs

Photo credit: Ron Mueller

When Amazon announced today it would lay off an additional 9,000 employees, AWS employees were not exempt, as Amazon CEO (and former AWS CEO) Andy Jassy announced that the cloud division would be included in today’s round.

TechCrunch hears about 10% of today’s total comes from AWS. The company would not confirm those figures, instead referring to Jassy’s memo to employees, released this morning as the core of its statement.

According to the memo, the company is phasing out the layoffs because some managers were still evaluating their departments and weren’t ready at the time of the first round. “The short answer is that not all teams were finished with their analysis by late fall; and rather than rushing through these reviews without due diligence, we chose to share these decisions as we made them so people had the information as quickly as possible,” Jassy wrote.

Ray Wang, founder and principal analyst at Constellation Research, says Amazon had to carefully consider every aspect of the organization, and AWS was no exception. “This is part of a larger trend of tech companies getting lean again, and Amazon has been bloated for the past several years. They finally completed their analysis a couple of weeks ago and now AWS has made cuts as well,” he said.

In the company’s most recent earnings report earlier last month, the cloud division’s growth rate slipped to 20%, down from more than 39% growth a year ago. To make matters worse, CFO Brian Olsavsky cabled that growth is slowing even further. “As we look to the future, we expect these optimization efforts to continue to be a headwind for AWS growth at least for the next few quarters. So far, AWS revenue growth for the first month of the year is in the mid-teens year-over-year,” he said at the time.

Against this background, the layoffs should not come as a surprise. In fact, the cloud infrastructure market as a whole is showing slower growth. After years of skyrocketing numbers, cloud spending is being cut and iIt’s starting to affect the market. At the end of the last earnings report cycle, the overall cloud infrastructure market slowed to 21% growthdown from 36% growth last year.

In addition, Amazon’s longtime rival Microsoft has gained market share. While Microsoft’s growth also slowed last quarter, the company has been growing faster and is beginning to slowly but steadily gain on AWS.