Amazon (NASDAQ:AMZN) has trimmed staff within its artificial general intelligence (AGI) unit, a move that underscores the company's intensified focus on generating returns from its massive capital expenditure program. The e-commerce and cloud computing giant did not disclose the number of positions affected, but the decision comes as investors closely watch the company's spending trajectory.
The headcount reduction, confirmed on Wednesday, is part of a broader effort to streamline internal AI initiatives. Amazon stated that large-model development remains a top priority, but the job cuts are intended to sharpen the company's focus on customer-centric applications. This follows a series of leadership changes in the AGI division, including the departure of Rohit Prasad, who led the unit, at the end of last year, and David Luan, head of the AGI Lab, who left in February. In December, Amazon consolidated its AGI operations under Peter DeSantis, who oversees custom silicon and quantum computing, more tightly integrating model research with the company's chip technology and cloud platform.
The AGI staff reduction is the latest in a series of workforce adjustments at Amazon. In January, the company announced 16,000 corporate layoffs, bringing cumulative cuts since October to approximately 30,000, or nearly 10% of its white-collar workforce. As of March 31, the company employed 1.575 million people globally.
Amazon's capital expenditure using cash in the first quarter surged 78% year-over-year to $43.2 billion, largely directed toward technology infrastructure and expanded fulfillment facilities. The company expects to invest roughly $200 billion in capital expenditures this year. Meanwhile, Amazon Web Services (AWS) revenue climbed 28% to $37.6 billion in the first quarter, with operating income rising 23% to $14.2 billion.
However, the heavy spending is pressuring cash generation. Trailing twelve-month free cash flow plummeted to $1.2 billion from $25.9 billion a year earlier, a decline of 95%. Amazon attributed the decrease primarily to increased spending on property related to AI investments. Cash capital expenditure for the quarter was 115% of AWS revenue, and capex growth outpaced AWS revenue growth by roughly 50 percentage points.
Chief Executive Andy Jassy has defended the expenditure, noting in April that AWS achieved its fastest growth in 15 quarters. He anticipates a strong long-term return on invested capital from the 2026 plan. Amazon shares slipped about 1.5% to $243.88 at midday, while the Nasdaq Composite fell 0.25% in mixed trading.
Amazon is scheduled to report second-quarter earnings after the market close on July 30. Investors will be focused on AWS growth, capital expenditure updates, and any developments related to AGI products. While the reduced research pipeline is not seen as a major concern as long as product launches remain consistent, the primary risk lies in execution. Leadership changes and workforce reductions could potentially delay progress on model development, and ongoing increases in capital expenditures may strain cash flow before new capacity begins generating revenue.
