Even More Layoffs Are Coming at Amazon. What Does That Mean for AMZN Stock?

Core Insights - Amazon's stock underperformed compared to big-cap peers in 2025, ending the year flat while the S&P 500 rose approximately 17% [1] - In 2026, Amazon's stock began with modest gains relative to its technical support levels [1] Business Strategy - Amazon is focusing on long-term priorities such as expanding cloud infrastructure, developing Trainium chips, launching new AWS data centers, investing in AI services, and upgrading Alexa [2] - The company is pivoting its physical retail strategy by closing or converting Amazon Fresh and Go stores into Whole Foods locations, while expanding same-day grocery delivery to leverage its Prime customer base [3] Cost Management and Layoffs - Amazon has announced another round of approximately 2,200 permanent job cuts across various states, with separations starting April 28 [5] - The company has cut tens of thousands of white-collar roles as part of a strategy to streamline operations and enhance decision-making efficiency [6] - The recent layoffs are positioned as necessary for organizational reset rather than financial distress, with Q3 net income increasing by 40% to $21 billion [9] Market Reaction and Valuation - The market reacted passively to the news of job cuts, with AMZN shares declining about 1% upon the announcement of 16,000 job cuts [10] - Amazon's trailing P/E ratio is approximately 33x, slightly above the peer group median of 32x, indicating a rich but not extreme valuation within its sector [7] Upcoming Earnings and Financial Outlook - Amazon is set to report Q4 2025 results, with consensus estimates of around $211.3 billion in revenue and $1.98 EPS, reflecting a year-over-year sales growth of 12-13% [11] - Investors are closely monitoring spending trends, with full-year 2025 capex projected near $125 billion and higher spending expected in 2026 [12] - Free cash flow fell sharply in Q3 due to AI infrastructure spending, making future funding strategies a point of interest for investors [13] Analyst Sentiment - Wall Street remains mostly positive on Amazon, with several firms raising price targets; Morgan Stanley leads with a target of $315 based on AWS growth [14] - Goldman Sachs maintains a "Buy" rating with a target of $275, emphasizing the underestimated growth potential of AWS [15]