Tech giant Amazon (AMZN) – Get Free Report Plans to invest another $35 a billion Despite cutting 18,000 employees, it moved to its cloud division, Amazon Web Services.
The company said on Jan. 20 that the additional investment to expand its AWS data center in Virginia will take more than a decade.
By 2040, AWS plans to build multiple data centers statewide and employ 1,000 people.
In 2021, AWS says it will employ 3,500 full-time people from 2011 to 2020 and has already spent $35 billion to build a data center in upstate.
Amazon’s large state investments could include tax exemptions for software and equipment purchases, and the company could receive state subsidies to help offset costs.
Virginia is working to create a new “Mega Data Center Incentive Program.” If the program is approved by state legislators, AWS will extend data center sales for up to 15 years and take advantage of tax exemptions on equipment and software.
State grants of up to $140 million “for site and infrastructure improvements, workforce development, and other project-related costs” are also available as AWS builds new data centers. may occur.
Big tech companies are cutting headcount, and Amazon is laying off and cutting 18,000 employees across its devices, books, people, experience and tech teams.
Amazon’s stock has rebounded after falling 32.54% over the past year. Amazon stock rose 14.38% last month.
The outlook for Amazon is bright
Analysts remain bullish on Amazon’s outlook, with 49 companies rated as buys, three as holds, and one as a sell, according to a FactSet survey.
Morgan Stanley equity analyst Brian Nowak said the layoffs would save $3.6 billion as the company maintained an overweight rating and a price target of $140 per share.
“While this is an important step, we are calling for more discipline on AMZN’s $10 billion to $15 billion non-core spending,” he wrote in a Jan. 5 research report. “Taking a step back, the job cuts confirmed by AMZN (following cuts by META and many other tech companies) are potentially more difficult for him to maintain leadership in 2024 and beyond. continue to invest in
Amazon is expected to improve its profit margins in the second half of 2023, he said in a Jan. 17 research note.
“AMZN continues to grow into a fulfillment overbuild, realizing reductions in non-core operating costs, demonstrating that it still leads the profit-generating position in e-commerce,” Nowak wrote. . “While short-term street earnings forecasts still look too high, we expect AMZN to outperform after forecasts adjust and margins improve in the second half.”
Oppenheimer analyst Jason Helfstein cut his estimate of revenue generated by AWS earnings in the fourth quarter of 2022 by 1%, and the outperformance on Amazon stock despite a 3% reduction for the full year 2023. Maintained the Perform rating with a target price of $130.
“Amazon’s web services segment is now the global leader in cloud computing and has great value,” he wrote on Jan. 13.
The economic outlook remains uncertain as fears of a recession and slowing growth are expected.
During the third quarter, AWS generated $20.5 billion in sales and Amazon generated $127.1 billion in sales.
Even if the economy doesn’t enter a recession, businesses may spend less money on technology. The outcome of the Federal Reserve’s plan to beat inflation by raising interest rates quickly remains uncertain.
Mizuho analyst James Lee said in a Jan. 12 research note: “AWS has strong long-term customer commitments, including a 60% year-over-year backlog increase, but recognizes that demand can be fluid from year to year.”
Lee maintained his Amazon purchase rating and target price of $135.
