From "mass layoffs" to "better than expected" – This week's most "reversed" company: Amazon

For Amazon and its CEO Andy Jassy, the past week has been nothing short of a roller coaster ride.

The tech giant kicked off the week with historic large-scale layoffs and external doubts about its AI strategy, but within just a few days, it rebounded sharply with a strong earnings report, ultimately closing with a record stock price and renewed investor confidence.

Clouds Gather: Layoffs and Concerns Over AI "Falling Behind"

Before the earnings report was released on Thursday, market sentiment was quite pessimistic. On Tuesday, Amazon announced layoffs of 14,000 employees, which intensified concerns about its corporate culture and AI capabilities.

Previously, top Wall Street analysts had labeled Amazon as an "AI laggard," and the reforms aimed at streamlining culture and reducing bureaucracy that CEO Andy Jassy has been implementing for a year have yet to deliver stronger returns for shareholders.

Investor anxiety was particularly focused on the slowdown in AWS's growth. Although AWS's revenue base far exceeds its competitors, its growth rate has lagged behind the cloud businesses of Microsoft and Google. Investment research firm CFRA bluntly stated in a report last week: "Accelerated revenue growth for AWS is essential."

Performance Counterattack: AWS and AI Progress Boost Confidence

The earnings report on Thursday became Amazon's most powerful counterattack.

The report revealed that AWS's sales reached $33 billion, a year-on-year increase of 20%, marking the fastest growth since 2022. At the same time, the company announced a series of positive developments regarding its artificial intelligence business, including strong demand for self-developed AI chips and related software, directly addressing investor concerns about potentially "falling behind" in the AI race.

• The self-developed AI chip Trainium 2 has become a business worth "billions of dollars."

• The AI shopping assistant Rufus is expected to indirectly contribute over $10 billion in sales.

• AWS's contract backlog (signed but unconfirmed revenue) has increased to $200 billion.

CEO Andy Jassy stated during the earnings call: "AWS is gaining momentum."

Financial firm William Blair noted that this is a "key step for Amazon in reclaiming the narrative." Baird's senior analyst Colin Sebastian also told Business Insider: "Jassy's strategy is proving successful, although there are still some details to resolve."

Following the release of the company's earnings report, the market's reaction was immediate. Wall Street analysts quickly raised their expectations, with Evercore's Mark Mahaney writing in a report: "The potential of AWS is being unleashed."

Barclays believes that "the progress made in the past 48 hours has greatly alleviated market concerns." Amazon has successfully reversed the market narrative

Not Just Financial Reports, Amazon's AI Infrastructure Takes a Step Forward

While releasing impressive financial reports, Amazon's AI infrastructure reaches a key milestone.

According to an article from Wallstreetcn, the Project Rainier core data center built by Amazon AWS has been fully operational and is currently training the Claude large model for Anthropic. The system has deployed nearly 500,000 Trainium 2 chips (expected to double to 1 million by the end of the year), making it one of the largest AI training computers in the world.

This indicates that Amazon's AI infrastructure expansion is shifting from strategic layout to capacity realization.

Morgan Stanley expects AWS's revenue growth rates to reach 23% and 25% over the next two years, while Bank of America predicts that Anthropic alone could bring up to $6 billion in incremental revenue to AWS by 2026.

Uncertain Future: Challenges of Catching Up with Competitors and Organizational Streamlining

Despite the market's cheers, skepticism has not completely disappeared. DA Davidson analyst Gil Luria pointed out that AWS's "market mind share" in the AI field has not yet caught up with Microsoft or Google Cloud, and there is still much work to be done. One detail is that Jassy avoided analysts' questions about the specific contribution of AI to AWS's growth during the earnings call.

Additionally, it remains uncertain whether layoffs have ended. Jassy stated on Thursday that the recent layoffs were not driven by cost pressures or AI, but rather for "cultural alignment."

He emphasized, "It is very important to remain lean, flat, and act quickly, and that is what we need to do." This statement suggests that organizational adjustments at Amazon may continue in order to achieve the culture he envisions