Amazon reported quarterly financial results on Thursday that exceeded analyst expectations, driven by significant revenue growth and record operating income within its $110 billion cloud-computing division. This led to a rise in its stock by as much as 6% in after-hours trading.
For the quarter, the company reported earnings of $1.43 per share on total revenue of $158.9 billion, surpassing average analyst predictions of $1.14 per share and $157.2 billion, respectively. The standout performer in these results was Amazon Web Services (AWS), Amazon’s cloud computing business, which has become a major growth channel, especially in the era of artificial intelligence.
AWS experienced a 50% year-over-year increase in operating income, reaching $10.4 billion. The unit’s revenue rose 19% from the same period the previous year to $27.5 billion, aligning with analyst forecasts. The operating profit margin for the division improved to 38%, up from 30% in the same quarter last year. This performance occurred despite the company making substantial investments in AI consumer products and expanding its AI services and infrastructure for corporate clients.
A significant uncertainty lies in how profits will evolve as AWS’s multi-billion-dollar generative AI business—where sales are growing more than 100% annually—becomes a larger portion of Amazon Web Services’ overall business. During the earnings call, Amazon CEO Andy Jassy stated that substantial investments in AI infrastructure, like data centers and chips, are necessary before monetizing or selling them. However, he anticipated “very healthy margins” in the generative AI space over time.
Amazon continues to increase capital expenditures, focusing on expanding its data center network to support AWS’s traditional segments as well as its generative AI endeavors. Investments in automation and robotics within Amazon’s warehouse network also contribute to this heightened spending. Jassy remarked that AI will play a significant role in the robotics network as Amazon automates warehouse operations.
Capital expenditure is projected to reach $75 billion by the end of the year, reflecting a 50% increase in the latter half of the year from the approximately $30 billion spent in the first six months. Jassy indicated that this total is likely to be surpassed in 2025, potentially affecting short-term profits but targeting what he described as “a maybe once in a lifetime opportunity.”
The CEO commented that, “The faster we grow demand, the faster we have to invest capital,” in reference to the generative AI businesses. AWS’s operating margin was further improved by 2 percentage points due to an accounting change related to the evaluation of data centers’ useful life. A moderated pace in hiring also contributed to the margin expansion, as stated by a company official.
Amazon’s core e-commerce business revenue increased 8% to $61.4 billion, driven by a broader selection of lower-priced items and a sales event for Prime members in the fall. Jassy noted the company’s efforts to enhance delivery speeds, resulting from a multi-year reorganization of its North American warehouse network into eight regions. In the last quarter, 40 million Prime customers benefited from same-day delivery at no additional cost, showing a more than 25% year-over-year increase, according to Jassy.
