All the superlatives notwithstanding, it is equally hard not to recognise that Amazon finds itself in something of a funk. With a downturn on the cards in America, its biggest market, shoppers are tightening their purse strings and corporate IT departments are paring back cloud spending. Amazon’s market value is down by around $1trn since its peak in mid-2021 (see chart 2), erasing all the gains of the covid-19 pandemic, when customers rushed to join its Prime subscription service and businesses were shifting their data to its cloud division, Amazon Web Services (AWS). This month Amazon announced 18,000 white-collar lay-offs, amounting to 6% of its corporate workforce. When it reports fourth-quarter earnings on February 2nd its annual revenue growth may for the first time ever come in at single digits, down from 22% in 2021. In October the company warned it might make little or no profit in the last three months of 2022.

Amazon’s Icarus moment is not unique in big tech. All its fellow tech high-fliers have been hit as demand for their digital wares declines now that people are no longer locked down at home and postmen no longer bring pandemic-stimulus cheques from the government. But under Andy Jassy, the AWS chief who took over as CEO after Mr Bezos retired in July 2021, Amazon has expanded much more aggressively than Alphabet, Apple, Meta and Microsoft (see chart 3). This exuberance leaves the company in a tough spot as it contends with three big challenges: a sputtering retail business; decelerating cash engines of AWS and a newish advertising business; and growing competition. Can the understated Mr Jassy overcome them, and turn Amazon’s sprawling empire into a dependably profitable business?

To understand how Amazon found itself in its current predicament, go back to just before the pandemic. The firm was already planning a big expansion of its warehouse and logistics network. The aim was to offer one-day delivery for more products to more Prime members. When national lockdowns created a boom in online shopping, Amazon doubled down. In April 2020 Mr Bezos told investors: “If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small.”

Over the next two years Amazon doubled the size of its fulfilment network. Mark Mahaney of Evercore ISI, an advisory firm, calculates that Amazon added about 130m square feet (12m square metres, or nearly four Central Parks) to its global footprint in both 2020 and 2021. In those years Amazon’s cumulative capital spending reached $100bn. No company anywhere in the world invested more in that period. Last year it may have invested another $60bn, again more than anyone else. Around half that sum went on warehouses and vehicles; most of the rest on AWS data centres. Amazon also increased its payroll to 1.6m, from 800,000 in 2019.

In the first quarter of 2022 Amazon admitted that overhiring and overbuilding were each adding $2bn to its quarterly costs, relative to 2021. Pricier fuel and higher wages meant a further $2bn a quarter. In April 2022 workers at a warehouse on Staten Island voted to unionise, and called for “more reasonable” productivity targets and more pay. If Amazon agrees to the union’s demands, the Staten Island warehouse alone could add $200m or so to annual operating costs, estimates Morgan Stanley, a bank. At the s