E-commerce giant Amazon (Nasdaq: AMZN) exceeded expectations in revenue in the third quarter, but the growth rate of cloud services remains slow.
On October 26th local time, Amazon released its financial report for the third quarter of the 2023 fiscal year, with a year-on-year increase of 13% in revenue to $143.083 billion, higher than market expectations of $141.6 billion; The net profit was 9.879 billion US dollars, compared to 2.872 billion US dollars in the same period last year, an increase of over 243% year-on-year; Diluted earnings per share were $0.94, higher than market expectations of $0.6.
Amazon expects sales in the fourth quarter to reach between $160 billion and $167 billion, slightly lower than the previous market expectation of $167.1 billion.
Amazon CEO Andy Jassy stated that the company achieved strong business growth in the third quarter, achieving significant cost reduction and improved delivery speed as an e-commerce platform. AWS cloud service growth is becoming increasingly stable, and advertising revenue growth is astonishing.
After the end of the day, Amazon's stock price quickly fell back after a significant increase, and then began to rise again, with an increase of over 5%. Amazon's current total market value is $1.23 trillion.
Amazon's revenue overview for the third quarter. Source: Amazon Financial Report
From a business perspective, as Amazon's core business, e-commerce sales revenue continued to recover, increasing by 6% year-on-year to $57.267 billion, with a growth rate of 5% in the previous quarter. The third quarter included the results of Amazon's Prime Day promotion held in July this year, which Amazon referred to as the "largest" promotion in history. In addition, the company's advertising service revenue in the third quarter reached $12.06 billion, a year-on-year increase of 25%; The revenue from subscription services was $10.17 billion, a year-on-year increase of 13%.
Before the financial report was released, the market was most concerned about whether the revenue of AWS cloud services had a turning point after continuous slow growth. AWS's revenue in the third quarter reached $23.059 billion, still lower than the market expectation of $23.2 billion, a year-on-year increase of 12%, and the growth rate remained the same as the previous quarter.
Although AWS's revenue growth rate has not yet reached a turning point, there are also highlights: while revenue has increased by 12% year-on-year, AWS's operating profit has also shown an upward trend, reaching $6.976 billion, an increase of about 29% year-on-year.
In the financial report, Jassy emphasized, "Our AWS team will continue to innovate and deliver quickly, especially in the field of generative AI (Artificial Intelligence). In this field, our customized AI chips, Amazon Bedlock, and CodeWhisper are the easiest and most flexible ways to build and deploy generative AI applications Allowing every enterprise to have a seasoned engineer who is proficient in understanding all specialized code has driven our cooperation with customers
Amazon's revenue was divided into three quarters. Source: Amazon Financial Report
Perhaps it was two days ago that Google's stock price plummeted due to its cloud service performance falling short of expectations. In the conference call after the financial report, Amazon executives emphasized the company's importance to cloud services and generative AI, and several times mentioned that the market is still in the early stages of cloud services and generative AI, and both the company and users are conducting extensive experiments and training.
During the conference call, Amazon CFO Brian Olsavsky stated that he did not believe AWS's growth was in a stagnant stage, but rather referred to it as a "complex" transition period.
Jia Xi also expressed optimistic views on the prospects of AWS, stating that the cloud computing department is seeing an increase in the speed and quantity of transactions. He also stated that AWS has signed several transactions in September, which will be reflected in the fourth quarter's performance.
Taking advantage of this opportunity, Amazon has also launched an advertisement for AWS's Bedlock AI. Jia Xi stated that AI has brought AWS an opportunity worth "tens of billions of dollars", and AWS's Bedlock AI service launched this year has simplified the development process of large models and can also solve the problem of chip shortages for users: "Our generative AI business is growing rapidly, very quickly
More than a month ago, on September 25th, Amazon announced that it would inject up to $4 billion into AI startup Anthropic, which is considered the number one competitor of OpenAI, to hold a small stake in the company and integrate Anthropic's technology into various products of its business. This indicates that Amazon is actively promoting its development in the AI field to keep up with competitors such as Microsoft and Google's parent company Alphabet.
On September 26th, the Federal Trade Commission (FTC) and 17 state attorneys general filed a comprehensive antitrust lawsuit against Amazon in a federal court in Seattle, accusing Amazon of abusing its "monopoly position" to raise prices, reduce consumer experience, and illegally exclude competitors, undermining fair competition. Amazon quickly responded by stating that FTC's allegations are "false in fact and law". During the conference call, Amazon did not discuss any information related to this lawsuit.