Amazon switch to robots will save it up to $4 billion a year, Morgan Stanley says
Amazon’s robotics ambitions can lead to multibillion-dollar cost cuts for the company, according to Morgan Stanley. Amazon plans to replace 600,000 jobs with robots in the coming years and, ultimately, is working towards its goal of automating 75% of its operations, The New York Times reported on Monday citing several internal strategy documents. The e-commerce giant is planning to add about 40 next-generation robotics warehouses by the end of 2027 and has already begun overhauling old fulfillment centers, per the report. These efforts could wipe out thousands of full-time human jobs across Amazon’s warehouses over the next decade — and the money could start rolling in within just a few years. Morgan Stanley analyst Brian Nowak estimated that the shift could translate to between $2 billion and $4 billion of annual recurring savings for the company by 2027. The analyst reiterated his overweight rating and $300 price target on Amazon stock, which suggests it can jump 35.1%. This year, shares of Amazon are down about 0.3%, making the mega-cap tech stock the laggard among “Magnificent Seven” members. The slump has been due in part to Amazon’s light operating income guidance for the third quarter. Analysts who remain bullish on the stock are betting on growth in its cloud computing service Amazon Web Services, along with its retail sales and online advertising. “Near-term we expect AWS growth to matter most for AMZN shares,” Nowak wrote in a Wednesday note to clients. “However, we continue to believe the market is under-appreciating AMZN’s GenAI advances in its Retail business with robotics-driven efficiencies.” AMZN 1Y mountain Amazon stock performance over the past year. To be sure, Morgan Stanley’s cost savings estimate could end up being on the softer end of Amazon’s own far-reaching goals. Nowak’s savings calculations were based on the estimated cost of about $3 to fulfill each Amazon order, with robots potentially making that process cheaper by 20% to 40%. That would then translate to savings of 60 cents to $1.20 per order. The analyst pointed to Amazon CEO Andy Jassy’s comments made during the company’s third-quarter earnings call in 2024. Back then, Jassy mentioned that Amazon’s most advanced robotic warehouse in Shreveport, Louisiana reduced fulfillment costs by around 25%. Jassy also said in July that Amazon was using more than 1 million robots across its facilities, which he said were “improving cost efficiencies” and leading to improved delivery times and lower costs for customers. “For perspective, we currently model AMZN ’27 company-wide EBIT of ~$124bn. That said, [Monday’s] report suggests the savings may actually be larger,” Nowak said. The Times reported that Amazon’s automation team thinks the company can avoid hiring more than 160,000 U.S. human workers that it would otherwise need by 2027, which would reduce costs by roughly 30 cents on each item Amazon ships out to customers. In this case, Nowak said that savings of 30 cents per unit implies roughly $10 billion in savings. “This seems high to us (given next-gen robotics warehouses may only be fulfilling 10%-20% of units by then). But it will be important to follow up with AMZN and industry experts on these estimates, as it could imply AMZN is on pace for even larger than expected robotics savings,” Nowak said. Amazon, the nation’s second-largest private employer, on Wednesday introduced a new robotic system called ‘Blue Jay’ that is capable of performing multiple tasks at once in its warehouses. The company has said that the system so far is able to pick, store and consolidate “approximately 75% of items we store at our sites.”
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