Amazon Executives Celebrate Strong Q2 Performance, Cloud Division Shows Promise
Amazon (AMZN) executives are basking in the success of the tech giant’s second-quarter performance. The company’s stock soared 10% to reach a one-year high in early trading on Friday, alleviating concerns about the declining growth of its cloud division, Amazon Web Services (AWS).
While AWS sales slightly exceeded expectations, Amazon also achieved significant wins in terms of operating income, operating margins, and its third-quarter outlook. The impressive results have left experts impressed, with Roth MKM managing director Rohit Kulkarni describing it as an “emphatic beat and raise” that hasn’t been seen in 18 months.
However, despite the positive outcome, Wall Street remains cautious about AWS’s decelerating sales growth, which has been on a downward trend for over a year. Insider Intelligence principal analyst Andrew Lipsman expressed surprise at the continued decline in AWS growth rates, despite the substantial earnings beat.
During the company’s media call, Amazon CFO Brian Olsavsky emphasized that Amazon is focused on execution and efficiency. Olsavsky stated that they are still cautious about headcount and cost structure until profitability is restored.
Meanwhile, Amazon is banking on artificial intelligence (AI) to drive future growth for AWS. CEO Andy Jassy, who previously led AWS, believes in the transformative power of AI. He highlighted the significant business driven by AI and machine learning in recent years and expects AI’s impact on AWS to be substantial in the future.
Although AWS’s AI efforts may start to impact the bottom line in Q3 or Q4 of this year, Lipsman remains skeptical about the specifics and timing of the benefits from Amazon’s AI investments. He questions the substance, applications, and efficiency savers that businesses need to invest in now.
Despite these lingering questions, Amazon’s strong quarter cannot be denied. Lipsman concludes that there is no other way to interpret it than as a remarkable performance.
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