Amazon (AMZN -0.68%) just had a great quarter, and its stock is rising as a result. Although shares are still down 16% year to date, Wall Street expects the e-commerce giant to keep growing because its business model seems to show resilience even during recessionary times. 

Yet, as good as business was for Amazon, there are warning signs too that should give investors pause. Maybe now isn't the best time to buy its stock.

Amazon workers unloading truck.

Image source: Amazon.

E-commerce slows as cloud services soar

Amazon's growth rate is slowing. While revenue of $121 billion was up 7.2% year over year, that was actually down sequentially and represents its slowest growth in 20 years. It also lost $2 billion in the period, with both domestic and international retail showing operating losses.

The core retail business continues to face a number of headwinds right now, including rampant inflation, energy costs that remain historically high, elevated transportation costs, and rising labor costs. 

While much of Amazon's net loss can be blamed on the continued downward spiral of electric truck maker Rivian in which Amazon has a big investment and caused a $3.9 billion pre-tax valuation loss, those macroeconomic inputs are also impacting Amazon's margins. 

But what's keeping the e-commerce company's financial position looking better than it otherwise would is the cloud services business, Amazon Web Services (AWS), which showed solid, double-digit growth of 33% in the quarter. AWS revenue hit $19.7 billion, generating operating income of $5.7 billion, also up 36%.

Trimming the fat and then some

And that may be masking a deeper issue. Amazon shed almost 100,000 workers in the quarter, or about 6% of its workforce, and they are the largest cuts it has made in a single quarter. 

CFO Brian Olsavsky said they added employees in the first quarter due to the omicron variant of the coronavirus, but they essentially became redundant afterward. It was able to get rid of most of those let go through normal attrition, and Amazon still has over 188,000 more workers than it did last year. He also said Amazon would likely increase staffing levels for the holidays again.

Chart of Amazon employee growth.

Still, after years of operating as a job-creation machine, the growth trajectory has suddenly come to an end. The reduction also likely helped Amazon save on labor costs in the quarter, something it struggled with during the so-called Great Resignation when people left their jobs and never returned to the market.

In last year's fourth quarter, for example, Amazon took a $4 billion charge mostly because of labor costs, and though Olsavsky said last quarter the company needed to improve efficiency while it increased staffing, it instead reduced employment levels.

The reduction comes as many other tech companies are also slashing their payrolls, including Microsoft and Shopify (SHOP -3.41%), while Alphabet and Meta Platforms have eased back on hiring. 

Clouds on the horizon

Amazon's payroll cuts likely helped improve its financial picture for the period, but it hints that the recessionary winds blowing may not be so transient. If we enter a protracted period of economic contraction, Amazon may see e-commerce growth slow as consumers find it difficult to keep spending.

Amazon.com is no longer necessarily the place to find the best price on goods, though admittedly that may not have been the prime attraction for its service in a while. Breadth of product and delivery speed has been a bigger value.

In a recession, though, that might not be the case, and despite its cloud services' increasingly essential to the overall businesses as time progresses, online retail may hamper performance. The underlying message of the job cuts just might mean this is not the time to buy Amazon stock.