Amazon delivered a satisfactory response to investors this financial reporting season: strong sales and profit growth, while suggesting that the profitability of the cloud computing department is recovering.
On Thursday (October 26th) local time, Amazon announced a third quarter operating profit of $11.19 billion, significantly higher than market expectations of $7.71 billion; Earnings per share of $0.94, market expectation of $0.58; The net sales amount is 143.08 billion US dollars, with a market expectation of 141.56 billion US dollars.
Among them, Amazon Network Services (AWS), the cloud computing department, had slightly lower revenue than expected in the third quarter, and AWS had net sales of $23.06 billion in the third fiscal quarter, slightly lower than market expectations of $23.13 billion. But CEO Andy Jesse stated that the business is stabilizing.
During the conference call, Jia Xi also stated that the company has signed several new agreements with customers, which will take effect this month. The demand for generative artificial intelligence may drive the development of the cloud department for a long time in the future.
After his remarks, the company's stock price surged by about 5% in post market trading. The stock closed at $119.57 per share on Thursday, with a cumulative increase of 43% this year.
Afterwards, analysts at investment bank Jeffrey stated in a report to clients that Amazon's cloud computing department's sales increased by 12% year-on-year, slightly higher than the previous quarter's data, marking the first quarter on quarter growth in AWS revenue in nearly two years.
Moving towards artificial intelligence
During a conference call, Jia Xi acknowledged that some companies are still seeking to reduce expenses for renting computing power and software, which hinders the growth of AWS and its competitors Microsoft and Alphabet in related business areas. However, Jia Xi said that many customers are still turning to running new projects on Amazon's servers.
Moreover, Jassy stated that Amazon's goal is to become a major player in the field of generative artificial intelligence. Generative artificial intelligence is a technology that can generate text or images based on a large amount of data.
Jia Xi stated that this technology represents potential revenue of "tens of billions" for AWS in the coming years. He stated that it is currently unclear how much these applications have driven sales in the department, but the department's business growth is "very, very fast".
In September, Amazon announced a partnership with artificial intelligence startup Anthropic. According to the agreement, Amazon will invest $1.25 billion, up to $4 billion, in Aerospace, which will use AWS technology and provide its artificial intelligence tools to AWS cloud customers.
Efforts to reduce costs are paying off
As investors analyze the health of Amazon's most profitable business, quarterly results clearly indicate that Amazon's efforts to cut costs are paying off. Last year, Amazon carefully reviewed expenses, reduced job positions, restricted recruitment, and closed edge projects.
In the third quarter, Amazon's sales and marketing expenses decreased compared to the same period last year, for the first time since at least 2015. The growth in technology and infrastructure spending, including salaries for software engineers and the cost of AWS servers, has only increased by 8.8%, about a quarter of what it was a year ago.
In addition, Amazon expects a net sales range of $160 billion to $167 billion in the fourth fiscal quarter, with a market expectation of $166.57 billion; The expected operating profit for the fourth fiscal quarter is $7 billion to $11 billion, with a market expectation of $8.71 billion.