Despite continuing to invest aggressively in AI, Amazon (AMZN) has begun cutting jobs within parts of its Artificial General Intelligence (AGI) group as part of an internal reorganization. That makes Amazon's latest move particularly interesting.
The AI race is no longer just about releasing the next chatbot. Hyperscalers are entering a new phase of growth as AI workloads continue to increase, prompting them to invest heavily in expanding their infrastructure. Amazon alone plans to spend roughly $200 billion in 2026, and those massive AI investments have weighed on the stock, even as Amazon Web Services (AWS) continues to deliver strong growth, the advertising business expands, and the company rolls out more AI products and services.
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The company says the changes are meant to help it focus on the AI projects that matter most to customers while it continues investing in AI models, cloud infrastructure, and custom chips.
So, what does this targeted reduction in Amazon's AGI team really say about the company's long-term AI ambitions?
AI Growth Engines Beyond the Headlines
Amazon's decision to cut jobs in parts of its AGI team looks more like a reorganization than a step back from AI. The company said the changes are meant to help it focus on the AI projects that matter most to customers and allow teams to move faster by putting more resources behind higher-priority work.
Amazon has made it clear that building large AI models remains one of its top priorities. If anything, the layoffs suggest the company is becoming more focused on where it spends its time and money, not less committed to AI. The goal appears to be putting more effort into the projects that can have the biggest impact across AWS and the rest of the business.
Recent developments support that view. Earlier this year, Pinterest (PINS) chose AWS to power the next stage of its AI-powered visual search and discovery platform. The partnership shows that businesses continue to rely on AWS for the computing power needed to build and run AI applications, reinforcing demand for Amazon's cloud infrastructure.
Also, Amazon is strengthening its AI business through new partnerships. In another recent move, Meta Platforms (META) signed an agreement to run agentic AI workloads on AWS Graviton chips. That deal highlights growing confidence in Amazon's custom chips and shows the company is building much more than AI models. It is investing across the entire AI stack, from chips and cloud infrastructure to the services customers use to develop and deploy AI applications.
Financial Strength Behind the Cuts
Amazon is one of the world's largest technology companies, generating revenue from online retail, AWS, digital advertising, subscriptions, and other technology services. Gains have been marginal recently. The stock is up 2.8% over the past 52 weeks and has gained 1.6% since the start of the year.
www.barchart.com It also trades at a forward price-to-earnings ratio of 31.93 times, well above the sector average of 15.98 times, showing that investors are willing to pay a premium.
In the first quarter, Amazon grew net sales by 17% year-over-year (YOY) to $181.5 billion. North America revenue rose 12% to $104.1 billion, international sales increased 19% to $39.8 billion (or 11% excluding foreign exchange impacts), and AWS revenue jumped 28% to $37.6 billion. Operating income improved from $18.4 billion to $23.9 billion, with every business segment contributing to the increase. AWS remained the biggest earnings driver, generating $14.2 billion in operating income, while North America and international operations contributed $8.3 billion and $1.4 billion, respectively.
Further, profitability improved sharply. Net income climbed to $30.3 billion, or $2.78 per diluted share, from $17.1 billion, or $1.59 per share, a year earlier, helped by $16.8 billion in pre-tax gains from Anthropic. Operating cash flow rose 30% to $148.5 billion over the trailing 12 months. Free cash flow, however, fell from $25.9 billion to $1.2 billion because Amazon spent an additional $59.3 billion on property and equipment, with the company saying most of that increase went toward expanding its AI infrastructure.
What Analysts See Ahead
The company’s second-quarter earnings release is set for July 30 after the market closes. Wall Street expects earnings of $1.82 per share, up 8.33% from $1.68 a year ago. Looking further out, consensus estimates call for full-year 2026 earnings of $7.75 per share, an 8.09% increase over 2025.
In April, KeyBanc raised its price target on Amazon to $325 from $285, pointing to continued strength in Amazon Web Services (AWS), improving grocery demand, and the growth potential of Amazon Leo.
Around the same time, Goldman Sachs analyst Eric Sheridan lifted his target to $335 from $325 while maintaining a "Buy" rating, citing Amazon's strong position in AI and cloud computing.
Even the more cautious updates remain positive. TD Cowen analyst John Blackledge lowered his target slightly to $340 from $350, but kept his "Buy" rating, with his target still well above where the stock trades today.
Overall, of 57 analysts covering the stock currently, a consensus rates it a "Strong Buy," and their average price target of $315.25 suggests 34.4% upside from current price levels.
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www.barchart.com Conclusion
Amazon's AGI layoffs look more like a strategic reset than a sign that it's pulling back from artificial intelligence. The company is still spending heavily on AI infrastructure, expanding AWS's AI capabilities, signing new enterprise partnerships, and earning strong support from Wall Street. That combination suggests Amazon is refining how it executes its AI strategy, not reducing its ambitions. If management continues turning those massive AI investments into stronger revenue and earnings growth, the stock has a solid chance of moving higher over the long term.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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