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 earnings of the cloud division. While third-quarter revenue at Amazon Web Services fell slightly short of projections, Jassy stated that the business is stabilizing and has signed new deals with customers. The demand for generative artificial intelligence is expected to further boost the division in the future. Following Jassy’s comments, Amazon’s shares rose by about 5% in pre-market trading.
Under Jassy’s guidance, Amazon has focused on cost cuts and increasing profits. The company has become more reliant on services such as advertising, logistics services for independent merchants, and renting computing power to corporations, which tend to generate higher profits than its original online retail business.
The cloud unit, AWS, reported a 12% increase in sales to $23.1 billion, marking the first quarter-to-quarter rise in revenue growth in almost two years. Its operating income of $6.98 billion exceeded analysts’ expectations by about $1.3 billion. AWS, which accounts for a significant portion of Amazon’s profit, reported its highest operating margin since Q1 2022.
Jassy acknowledged that some companies are still cutting 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, which has the potential to generate “tens of 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 strengthen Amazon’s position in generative AI applications.
The quarterly results also highlighted Amazon’s successful cost-cutting efforts. The company reduced spending on sales and marketing compared to the previous year, while increasing spending on technology and infrastructure at a slower rate.
Amazon’s third-quarter revenue reached $143.1 billion, a 13% increase, surpassing analysts’ estimates. The central online stores performed well, 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 operating income expected to be $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.