Amazon reported its Q1 earnings on Thursday which exceeded expectations, but its cloud growth is set to slow further due to the turbulence faced by its business customers, leading to a drop in its stock value. Amazon CFO, Brian Olsavsky, stated that cloud customers were attempting to reduce their bills and Amazon was helping them do so to build long-term relationships, which led to revenue growth rates dropping by about 5 percentage points in April compared to the first quarter.

CEO Andy Jassy is trying to slash spending across Amazon’s various divisions due to the uncertain economy. Amazon is also facing a nascent threat from cloud rivals Microsoft and Google who are launching high-profile artificial intelligence tools. Amazon has implemented deep cost cuts by aiming to axe 27,000 corporate roles since November and reducing its headcount by 10 per cent to 1.47 million full and part-time workers. The company is also ending entire services, including its Halo health trackers, and has reorganized its national fulfillment operation.

Despite these cost cuts, Amazon’s cloud slowdown was deemed “tremendous” by analysts. However, the company reported better-than-expected sales of $127.36 billion in the first three months of the year and projected revenue between $127 billion and $133 billion in the second quarter. Amazon’s CFO stated that the economy had brightened internationally and that demand in North America held up, although customers were looking for value and possibly putting off discretionary purchases.

Amazon remains confident in its cloud in the longer term, with CEO Jassy saying that the growing adoption of generative AI, which can create text, imagery and other content from past data, represents a huge opportunity for Amazon’s cloud. Additionally, Amazon’s proprietary chips can power much of what businesses wish to do with AI, and the company has launched new AI tools. The company’s CFO also stated that Amazon had seen no shift in the competitive balance among cloud providers.

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