The burgeoning demands of generative AI are fundamentally reshaping the competitive landscape of cloud computing, compelling even market leaders like Amazon to critically assess their strategic investments. CNBC’s MacKenzie Sigalos, reporting on Amazon’s third-quarter earnings, underscored that the company’s cloud momentum and substantial AI infrastructure spending are now under intense scrutiny, with investors eager to […]
Amazon just opened Project Rainier, one of the world’s largest AI compute clusters, in partnership with Anthropic.
Amazon’s third-quarter profits rose 38% to $21.2 billion, but a big part of the jump had nothing to do with its core businesses of selling goods or cloud services.
The company reported a $9.5 billion pre-tax gain from its investment in the AI startup Anthropic, which was included in Amazon’s non-operating income for the quarter.
The windfall wasn’t the result of a sale or cash transaction, but rather accounting rules. After Anthropic raised new funding in September at a $183 billion valuation, Amazon was required to revalue its equity stake to reflect the higher market price, a process known as a “mark-to-market” adjustment.
To put the $9.5 billion paper gain in perspective, the Amazon Web Services cloud business — historically Amazon’s primary profit engine — generated $11.4 billion in quarterly operating profits.
At the same time, Amazon is spending big on its AI infrastructure buildout for Anthropic and others. The company just opened an $11 billion AI data center complex, dubbed Project Rainier, where Anthropic’s Claude models run on hundreds of thousands of Amazon’s Trainium 2 chips.
Amazon spent $35.1 billion on property and equipment in the third quarter, up 55% from a year earlier.
Andy Jassy, the Amazon CEO, sought to reassure Wall Street that the big outlay will be worth it.
“You’re going to see us continue to be very aggressive investing in capacity, because we see the demand,” Jassy said on the company’s conference call. “As fast as we’re adding capacity right now, we’re monetizing it. It’s still quite early, and represents an unusual opportunity for customers and AWS.”
The cash for new data centers doesn’t hit the bottom line immediately, but it comes into play as depreciation and amortization costs are recorded on the income statement over time.
And in that way, the spending is starting to impact on AWS results: sales rose 20% to $33 billion in the quarter, yet operating income increased only 9.6% to $11.4 billion. The gap indicates that Amazon’s heavy AI investments are compressing profit margins in the near term, even as the company bets on the infrastructure build-out to expand its business significantly over time.
Those investments are also weighing on cash generation: Amazon’s free cash flow dropped 69% over the past year to $14.8 billion, reflecting the massive outlays for data centers and infrastructure.
Amazon CEO Andy Jassy at the GeekWire Summit in 2021. (GeekWire File Photo / Dan DeLong)
Amazon CEO Andy Jassy says the company’s latest big round of layoffs — about 14,000 corporate jobs — wasn’t triggered by financial strain or artificial intelligence replacing workers, but rather a push to stay nimble.
Speaking with analysts on Amazon’s quarterly earnings call Thursday, Jassy said the decision stemmed from a belief that the company had grown too big and too layered.
“The announcement that we made a few days ago was not really financially driven, and it’s not even really AI-driven — not right now, at least,” he said. “Really, it’s culture.”
Jassy’s comments are his first public explanation of the layoffs, which reportedly could ultimately total as many as 30,000 people — and would be the largest workforce reduction in Amazon’s history.
The news this week prompted speculation that the cuts were tied to automation or AI-related restructuring. Earlier this year, Jassy wrote in a memo to employees that he expected Amazon’s total corporate workforce to shrink over time due to efficiency gains from AI.
But his comments Thursday framed the layoffs as a cultural reset aimed at keeping the company fast-moving amid what he called “the technology transformation happening right now.”
Jassy, who succeeded founder Jeff Bezos as CEO in mid-2021, has pushed to reduce management layers and eliminate bureaucracy inside the company. Amazon’s corporate headcount tripled between 2017 and 2022, according to The Information, before the company adopted a more cautious hiring approach.
Bloomberg News reported this week that Jassy has told colleagues parts of the company remain “unwieldy” despite efforts to streamline operations — including significant layoffs in 2023 when Amazon cut 27,000 corporate workers in multiple stages.
On Thursday’s call, Jassy said Amazon’s rapid growth led to extra layers of management that slowed decision-making.
“When that happens, sometimes without realizing it, you can weaken the ownership of the people that you have who are doing the actual work and who own most of the two-way door decisions — the ones that should be made quickly and right at the front line,” Jassy said, using a phrase popularized by Bezos to help determine how much thought and planning to put into big and small decisions.
The layoffs, he said, are meant to restore the kind of ownership and agility that defined Amazon’s early years.
“We are committed to operating like the world’s largest startup,” Jassy said, repeating a line he’s used recently.
Given the “transformation” he described happening across the business world, Jassy said it’s more important than ever to be lean, flat, and fast-moving. “That’s what we’re going to do,” he said.
Jassy’s comments came as Amazon reported quarterly revenue of $180.2 billion, up 13% year-over-year, with AWS revenue growth accelerating to 20% — its fastest pace since 2022.
Amazon said it took a $1.8 billion severance-related charge in the quarter related to the layoffs.
Amazon joins other tech giants including Microsoft that have trimmed headcount this year while investing heavily in AI infrastructure.
Amazon’s headquarters campus in Seattle. (GeekWire Photo / Kurt Schlosser)
Reaction to a huge round of layoffs rippled across Amazon and beyond on Tuesday as the Seattle-based tech giant confirmed that it was slashing 14,000 corporate and tech jobs.
We’ve rounded up some of what’s being said online and/or shared with GeekWire:
‘Never been laid off before’
A megathread on Reddit served as a collection of comments by impacted employees who posted about their level, location, org and years of service at Amazon.
Workers across ads, recruitment, robotics, retail, Prime Video, Amazon Games, business development, North American Stores, finance, devices and services, Amazon Autos, and more used the thread to vent.
“TPM II for Amazon Robotics, 6.5 years there. Still processing this, I’ve never been laid off before.”
“L6 SDEIII, started as SDEI 7 years ago. I went L4 to L6 in 3 years. My last performance review I got raising the bar. Thought I was a top performer but guess I’m expendable.”
“Never been laid off before feels overwhelming on VISA! Someone please help me understand next steps in terms of VISA, if I am not able to get H1b sponsoring job in next 90 days will I have to uproot everything here and go back?”
“I heard AWS layoffs come after re:invent to avoid customer disruption and bad press.”
“It’s heartbreaking how impersonal and abrupt these layoffs have become. People who’ve given years to a company are finding out in minutes that they’re done.”
“Wait, I’m sorry: Amazon made people relocate, switch their kids’ schools, and bookend their days with traffic for RTO only to lay them off via a 3 a.m. text? What happened to the vibe and conversations that only being together at the office could allow?” Coulter wrote on LinkedIn.
‘Reduced functionality’
Some employees shared how they were quickly locked out of work laptops, expressing confusion about whether that was how they were supposed to learn about being terminated.
“I lost access to everything immediately :( ,” one Reddit user said.
Others discussed how they should have found time to transfer important work examples or positive interactions related to their performance over to personal computers.
“One thing I would recommend for everyone is to back up your personal files onto your personal laptop,” one user said on Reddit. “I used to keep all my accolades and praise in a quip file along with all my 2×2 write ups and MBR/QBR write ups cataloging my wins. When I found out I got laid off my head was spinning so I went outside for a walk, by the time I returned I was locked out of my laptop and no longer had access to anything.”
Amazon human resources chief Beth Galetti pinned the layoffs in part on the need to reduce bureaucracy and become more efficient in the new era of artificial intelligence. Others looked for deeper meaning in the cuts.
In a post on LinkedIn, Yahoo! Finance Executive Editor Brian Rozzi said stock price is likely a key consideration when it comes to top execs and the Amazon board signing off on such mass layoffs.
Amazon’s stock was up about 1% on Tuesday to $229 per share.
“If the layoffs keep jacking up the stock price, maybe I can retire instead,” one longtime employee told GeekWire.
Entrepreneur and investor Jason Calacanis posted on X about how AI was coming for middle managers and those with “rote jobs” faster than anyone expected. He encouraged workers to become a founder and do a startup before it’s too late.
Hard-hit divisions
Mid-level managers in Amazon’s retail division were heavily impacted by Tuesday’s cuts, according to internal data obtained by Business Insider.
More than 78% of the roles eliminated were held by managers assigned L5 to L7 designations, BI reported. (L5 is typically the starting point for managers at Amazon, with more seniority assigned to higher levels.)
BI also said that U.S.-focused data showed that more than 80% of employees laid off Tuesday worked in Amazon’s retail business, spanning e-commerce, human resources, and logistics.
Steve Boom, VP of audio, Twitch, and games said in a memo shared with The Verge that “significant role reductions” would be felt at studios in Irvine and San Diego, Calif., as well on Amazon’s central publishing teams.
“We have made the difficult decision to halt a significant amount of our first-party AAA game development work — specifically around MMOs [massively multiplayer online games] — within Amazon Game Studios,” Boom wrote.
Current titles in Amazon’s MMO lineup include “New World: Aeternum,” “Throne and Liberty,” and “Lost Ark.” Amazon also previously announced that it would be developing a “Lord of the Rings” MMO.
‘Ripple effects throughout the community’
Amazon employees and others line up at a food truck near Amazon offices in Seattle’s South Lake Union neighborhood. (GeekWire File Photo / Kurt Schlosser)
Jon Scholes, president and CEO of the Downtown Seattle Association (DSA), has previously praised Amazon for its mandate calling for employees to return to the office five days per week, saying that the foot traffic from thousands of tech workers in the city is a necessary element to helping downtown Seattle rebound from the pandemic.
On Tuesday, Scholes reacted to Amazon’s layoffs in a statement to GeekWire:
“As downtown’s largest employer, a workforce change of this scale has ripple effects throughout the community — on individual employees and families and our small businesses that rely on the weekday foot traffic customer base. In addition, these jobs buttress our tax base that helps fund the city services we all depend on. Employers have options for where they locate jobs, and we want to ensure downtown Seattle is the most attractive place to invest and grow. We must provide vibrancy and a predictable regulatory environment in a competitive landscape because other cities would welcome the jobs currently based in downtown.”
Amazon said on Tuesday that it plans to reduce its corporate workforce by 14,000 jobs as it seeks to reduce bureaucracy, remove layers, and invest more in its AI strategy.
NBA Commissioner Adam Silver is interviewed during Amazon’s first-ever live streamed NBA game on Friday. (Screenshots via Prime Video stream)
“It is here, it is real, it is happening,” said play-by-play announcer Ian Eagle. “The NBA on Prime.”
And with that, Amazon’s foray into live streaming NBA games tipped off.
Amazon marked a major milestone with its growing sports portfolio on Friday, broadcasting its first-ever live NBA game around the world. The matchup — Celtics vs. Knicks — was part of an 11-year deal that gives Amazon exclusive rights to select regular season and playoff games.
We watched the game via Prime Video — accessible with a $139/year Prime subscription — and came away impressed.
The stream ran seamlessly across Fire TV, iPhone, and MacBook. The quality was crisp, load times near-instant, and there wasn’t a hint of lag — at least on a home WiFi connection. Amazon’s 1080p HDR video and 5.1 surround sound were a slam dunk.
The broadcast looked and felt like a traditional national telecast.The graphics mirrored what fans expect from ESPN or TNT, the commentary came from familiar voices — Eagle and Stan Van Gundy — and the pregame show from featured a slick set with former NBA stars at Amazon MGM Studios.
Amazon’s pre-game show features a LED court that helps analysts explain basketball dynamics. The show includes (from left) host Taylor Rooks and former NBA stars Steve Nash, Udonis Haslem, Dirk Nowitzki, and Blake Griffin.
But under the surface, Amazon quietly tested a new frontier: in-stream sports betting.
The most noticeable new feature was the FanDuel integration, Amazon’s latest experiment in blending live sports and interactive technology.
Fans watching on Fire TV could log into their FanDuel accounts through Prime Video to view real-time betting information and track wagers directly within the broadcast.
You can’t make actual bets on Prime Video — not yet, at least— but it marks a subtle yet significant shift in how live sports may evolve on streaming platforms.
I was surprised when NBA Commissioner Adam Silver joined the broadcast for a live interview. Sideline reporter Cassidy Hubbarth opened by asking about the scandal.
Silver said he was “deeply disturbed” upon hearing the news.
“There’s nothing more important to the league and its fans than the integrity of the competition,” he said.
Silver also praised Amazon’s coverage: “I should have started [by saying] how excited we are to be on Amazon,” he said. “I guess I wouldn’t have predicted that my first interview on Amazon would be about sports betting.”
The interview underscored how Amazon’s coverage didn’t shy away from real-time news relevance — adding a traditional journalistic layer within a tech-powered broadcast.
It was also a surreal moment: the NBA’s top official discussing a sports betting scandal during the league’s debut on a platform now integrating betting tools into its stream.
Amazon has other new tech-fueled features including advanced NBA stats powered by Amazon Web Services — but I didn’t notice that during Friday’s broadcast.
One of the only stumbles for me came on the Fire TV user experience, which feels clunky compared to mobile or desktop. Navigation wasn’t intuitive, and the remote’s button mapping made simple actions harder than expected.
But overall, the whole experience felt less like a tech demo and more like a finished product.
Amazon.com’s homepage promoted the NBA game.
Amazon’s sports strategy is crystalizing: use live sports to drive Prime signups and boost engagement across its ecosystem. The broadcast was promoted on Amazon’s homepage and apps. Live sports also helps fuel Amazon’s growing advertising business.
Bloomberg reported that Amazon is paying $1.8 billion annually for the NBA rights.
As more people cut the cord, sports leagues are increasingly partnering with tech companies as their existing deals with traditional cable providers expire. Companies like Amazon, Apple, and Netflix are hungry for valuable content such as live sports to draw more subscribers to their respective platforms.
Amazon also aired the Timberwolves vs. Lakers game on Friday evening. It will stream 66 regular season games this year, along with some playoff games.
The company also separate deals to air the NFL’s Thursday Night Football, WNBA, and Premier League, among other sports-related programming on its Prime Video platform.
The NBA debut on Friday was a reminder of Amazon’s approach to live sports: combine the reliability of broadcast TV with subtle tech layers — such as betting, data, and e-commerce — built on its AWS cloud infrastructure and Prime membership model.
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