Amazon CEO Andy Jassy delivered positive news to investors during this earnings season, with strong sales and profit growth. He also hinted at a resurgence in the cloud division’s earnings. While Amazon Web Services (AWS) fell slightly short of revenue projections for the third quarter, Jassy stated that the business is stabilizing. The company has signed new deals with customers, and the demand for generative artificial intelligence is expected to drive growth in the division. Following Jassy’s comments, Amazon’s shares rose by about 5% in pre-market trading.
Under Jassy’s leadership, Amazon has focused on cost-cutting measures and increasing profitability. The company has shifted its reliance to services that generate higher profits, such as advertising, logistics services, and renting computing power to corporations.
AWS reported a 12% increase in sales, reaching $23.1 billion. This growth rate marked the first quarter-to-quarter rise in revenue growth for AWS in nearly two years. The operating income of $6.98 billion exceeded analysts’ expectations by $1.3 billion. AWS, which typically generates more profit than the rest of the company combined, reported its highest operating margin since Q1 2022.
Jassy acknowledged that some companies are still reducing their spending on rented computing power and software, affecting AWS’s growth. However, many clients are now choosing to run new projects on Amazon’s servers. Jassy also outlined Amazon’s plans to become a major player in generative AI, a technology that has the potential to generate billions in revenue for AWS over the next few years.
During the quarter, Amazon announced a partnership with AI startup Anthropic, investing $1.25 billion to $4 billion in the company. This move aims to enhance Amazon’s generative AI applications and catch up with competitors like Microsoft and Google.
The quarterly results demonstrated the success of Amazon’s cost-cutting efforts. The company reduced spending on sales and marketing compared to the previous year, while increasing spending on technology and infrastructure by only 8.8%, a quarter of the rate from a year ago.
Amazon’s third-quarter revenue reached $143.1 billion, a 13% increase, surpassing analysts’ estimates. The central online stores performed better than expected, generating $57.3 billion in revenue, a 7% increase from the previous year. Advertising sales also saw a significant jump of 26% to $12 billion.
For the quarter ending in December, Amazon projected sales of $160 billion to $167 billion, with an operating income of $7 billion to $11 billion. While company executives expressed caution about holiday-quarter spending, analysts remain optimistic about Amazon’s strong momentum heading into the holiday season.
Overall, Jassy’s positive earnings report and Amazon’s cost-cutting measures have impressed investors and positioned the company for continued growth in various sectors, including cloud computing and generative AI.