Amazon’s aggressive push into warehouse robotics could unlock billions in cost savings, according to a recent analysis by Morgan Stanley. The e-commerce behemoth is reportedly aiming to automate 75% of its operations, potentially displacing a significant portion of its workforce as it rolls out next-generation robotics warehouses across its fulfillment network.
Citing internal strategy documents, a recent report highlights Amazon’s plan to add approximately 40 advanced robotics warehouses by the end of 2027, alongside ongoing overhauls of existing facilities. This ambitious automation roadmap could translate to substantial workforce reductions over the next decade, with financial benefits materializing in the near term.
Morgan Stanley analyst Brian Nowak projects that this robotic transformation could generate between $2 billion and $4 billion in annual recurring savings by 2027. Nowak maintains an “overweight” rating on Amazon stock with a $300 price target, implying a potential upside of 35.1%. While Amazon shares have underperformed relative to other “Magnificent Seven” stocks this year, largely due to lighter-than-expected operating income guidance for the third quarter, the long-term outlook remains positive.
Bullish analysts are pinning their hopes on continued growth in Amazon Web Services (AWS), its dominant cloud computing division, as well as strong retail sales and robust online advertising revenue. Nowak emphasized the importance of AWS growth for Amazon’s share price in the immediate future. However, he also believes the market is undervaluing Amazon’s advancements in GenAI, particularly as they drive efficiency gains in its retail operations through robotics.
“Near-term we expect AWS growth to matter most for AMZN shares,” Nowak wrote in a recent note. “However, we continue to believe the market is under-appreciating AMZN’s GenAI advances in its Retail business with robotics-driven efficiencies.”
While Morgan Stanley’s cost savings estimates are considerable, they might represent a conservative view of Amazon’s potential. Nowak’s calculations are based on an estimated fulfillment cost of roughly $3 per order, with robots potentially reducing that expense by 20% to 40%, translating to savings of 60 cents to $1.20 per order.
Amazon CEO Andy Jassy previously stated that the company’s most advanced robotic warehouse in Shreveport, Louisiana, has already reduced fulfillment costs by approximately 25%. Jassy also noted that Amazon is utilizing over 1 million robots across its facilities, contributing to improved cost efficiencies, faster 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 noted.
The report suggests that Amazon’s automation initiatives could potentially eliminate the need to hire over 160,000 additional U.S. workers by 2027, resulting in cost reductions of approximately 30 cents per item shipped. Nowak suggests that savings of 30 cents per unit could translate into 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 concluded. This potential for increased efficiencies coincides with the introduction of systems like ‘Blue Jay’, capable of handling multiple warehousing tasks, and capable of handling a large percentage of current inventory. This points to a future where Amazon is a leaner more automated operation, increasingly insulated from labor market volatility.
Original article, Author: Tobias. If you wish to reprint this article, please indicate the source:https://aicnbc.com/11420.html
