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The Ratings Game: Amazon is laying off more than 18,000. Morgan Stanley is looking for the company — and the tech industry — to tighten things up even more


Amazon’s plans to lay off more than 18,000 workers are the biggest yet in the tech industry’s most recent wave of job cuts. Morgan Stanley analysts are looking for the e-commerce giant — and the broader tech universe — to rein in costs even more.

“This is an important step,” the analysts said of Amazon’s

cuts in a note on Thursday, “but we look for even more discipline on AMZN’s $10-$15bn of noncore spend.”

The layoffs at Amazon — and their magnitude relative to the tech industry — were first reported on by the Wall Street Journal on Wednesday. They come after big cuts at Meta Platforms Inc.
Salesforce Inc.

and HP Inc.
after consumers loaded up on electronics and other goods sold online during the height of the pandemic, and following a dropoff in digital-ad spending and fears of a recession.

The Journal reported that most of the layoffs would come from Amazon’s corporate staff. The 18,000 positions to be eliminated reflect the total amount of those reported and announced by Amazon on Wednesday, as well as those made in November.

The Morgan Stanley analysts said they expected the layoffs at Amazon to lead to around $3.6 billion in yearly savings. But they said they were surprised that most of Amazon’s layoffs will be concentrated in Amazon Stores and its People Experience and Technology Solutions — or PXT — teams.

They said they expected more paring back within the company’s segments devoted to devices and Alexa — Amazon’s AI assistant — which they believe comprised a majority of the estimated $10 billion to $15 billion in what the analysts called “other bets” investment projects.

“We will look to see whether a significant portion of these headcount reductions will still becoming from these more expensive teams,” the analysts said.

Morgan Stanley maintained its version of a “buy” rating on Amazon, along with its $140 price target. Shares of Amazon slipped 1.3% on Thursday.

Within the tech industry overall, they said, the biggest investor pressure lies on Google parent Alphabet Inc.

to quantify any possible plans to lay off employees or otherwise cut costs. A report by The Information in November about a new performance-tracking system at Google has raised worries of steeper layoffs up ahead.

“Stepping back, AMZN’s confirmed headcount reductions (following META and many other tech companies’ reductions) are important symbolically as theyspeak to another tech company making difficult (but required) decisions on howto better manage cash flow through a potentially more challenging ’23/’24,” the Morgan Stanley analysts said.

They added, “It is important that tech companies continue to showcase their ability / willingness to make these difficult decisions as they compete for investor capital.”

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