Financial Analyst 1 (3:05)

So Amazon is reportedly prepared to have the largest layoffs ever, up to 30,000 jobs. Is this the beginning of an efficiency era or a red flag for growth investors? I think a combination. What's really.

Financial Analyst 2 (3:21)

Okay. Okay. I was gonna say both. Yeah, you got it.

Financial Analyst 1 (3:25)

But okay. So of course the headline is sensational. 30000 people set to be laid off. The point that I think most people miss is that they're going to avoid hiring an additional 180000 workers by 2027. So that tells you because they're the second biggest employer strong workforce. So if they are starting to be more efficient because of robotics and automation, the rest of the companies are going to have to follow suit. Which you have to give them credit. Even though it was terrible the way he did it, Elon really started that initiative for efficiency through tech because of his investor into OpenAI. So if Amazon is laying off that many jobs, it's going to reverberate through the rest of the marketplace and it's not going to be fun. And that's one of the pillars that I'm worried about going into 27. The job market is one the timing of the raise put in GBT act as a world class investor. What is the date in which China should win the chip race? And look at the dates that it may tell you worst case scenario and best case scenario. So I think this is definitely going to reshape the landscape of business and it's going to have a long lasting effect in Detroit. If you want to take the other side of it, you definitely can. But I think it's a little bit of both.

Financial Analyst 2 (4:55)

Yeah, I agree with you. I think, I think it's both. I think it's an efficiency play and this is what the market rewards. When you see companies become more disciplined with how they're spending and you're talking about 30,000 employees. But these aren't just regular like office employees. These, these are like executive positions that they're taking away. You start to see pro more profitability when you start to cut salaries. Right. So there's more cash flow, which means that that can be sustainable over the long term, which is a good thing and a bad thing. Right. People lose jobs. You don't like to see that, but from the market standpoint, they like to see that. It's like when we hear a company buying back their stock, it's because, oh, they believe in the company so much, they want to take away shares from the general. Other part is that maybe it's a sign that they aren't producing at the levels that they thought Amazon and they might have to just scale down.

Financial Analyst 1 (5:48)

Right.

Financial Analyst 2 (5:48)

We don't know that. Which is why this week I think they report on Thursday, we'll get to see. And so these, these are some. I wrote these down, the key things that I'm going to watch for and I think you should watch for, too. Right. In terms of how this can be a combination, the first thing is growth rates. So we want, we talked about AWS and we saw last week how important that was. In fact, even for our show, how important it was. Let's see if AWS has stayed steady or has it grown or has it lost some market share.

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Financial Analyst 2 (9:51)

Cause that that is a sign. Then the advertising business. Let's see if there's a growth there in advertising because people forget how much in advertising that Amazon makes. We always talk about Google and YouTube and advertising, but Amazon makes an absolute killing then E Commerce, the international right. Have they expanded? Because that was one of those things when we talk about yes, they've dominated here, but they have an international presence. Yes. How the is there growth here and is there growth in the international E commerce. Those are the things that I'm watching for because it is one of my favorite companies and I refuse to trade options on it. I just own shares on it to see what this 30,000 really means. Short term, long term. Right. Because if I start to see the growth rates and I start those things are all improving, then it's just like, all right, this is an efficiency play. They want to scale down to have more revenue. If not, then it's a sign that hey, maybe we're not producing at the level that they thought they would this quarter.

Financial Analyst 1 (10:50)

The, the issue that I've always has been a stock club pick since 2019 in the retirement portfolio. The issue they always had was a margin issue. And so I'll be very clear, gross margin 48 net margin is 10.5. For a company that is almost a monopoly to be that big, that is a historically low profit margin. They're going to find a way to do anything they can now that it's acceptable to get the human capital cost off the balance sheet to drive profit up. And they are going to set the table for it to be okay for everyone else to do so. But once again, 2027, they're going to avoid hiring another 180,000 workers. That's a big number to keep your eyes on. And if that stays true, the way that corporate is going to be reshifted, we're never going to go back to mass hiring the way that it was once done.

Financial Analyst 2 (11:48)

Yeah, yeah. And that, that, that profit margin is actually improved. We've seen it at like 5.

Financial Analyst 1 (11:57)

Yeah.

Financial Analyst 2 (11:59)

When you said 10, I was like, oh yeah, it's actually improving.

Financial Analyst 1 (12:02)

10.55. Yep.

Financial Analyst 2 (12:03)

And, and they're one of the leaders in term of cap expense when it comes to AI.

Financial Analyst 1 (12:08)

But you got to give them credit for that because through truncated net margin they've always invested for the future and now they are in a position to take advantage of it. They may be the preeminent company that Russia, the ushers in that iRobot type, which is another thing that Elon is trying to do. And it's a race even amongst tech as we're in the war with China to see who can get automation and efficiency at scale, which is going to decimate the job market. Yeah, for sure.

Financial Analyst 2 (12:41)

They kind of just been quiet, but just steadily like, I mean if you look at the stock, it, it's pretty much been flat for the year when you look at it. But even some of the moves they've made, like with, with their data center expansion, their partnership with Anthropic, them increasing their partnership with Anthropic. They're making the moves. But I I'm with you. I think they've always had the long term approach, like we're going to invest now big so that we can pay off later.

Financial Analyst 1 (13:06)

Yeah, but in april they were at 169 0. They're currently at 226.97. So given the hard capital cost that they have, they've done a pretty tremendous job. And like you said, moving up that net margin from 5 to 10% or 10.55%. Yeah, over the last year and a half has been great.

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