Amazon Quarterly Profit Doubles as Cloud Business Grows

AFP/APP

San Francisco: Amazon reported on Thursday that its profit for the recently ended quarter doubled to $13.5 billion, buoyed by the renewed momentum of its AWS cloud computing business.

Despite this impressive profit increase, the e-commerce giant’s sales totaled $148 billion, falling just short of market expectations. As a result, shares slid more than four percent to $176.50 in after-market trades.

“We’re continuing to make progress on a number of dimensions, but perhaps none more so than the continued reacceleration in AWS growth,” said Amazon CEO Andy Jassy. Revenue from the AWS cloud computing unit grew to $26.3 billion, up from $22.1 billion in the same period a year earlier.

However, Amazon’s ad revenue of $12.7 billion was also below expectations, which had predicted $13 billion. Retail, ads, and cloud computing are considered Amazon’s financial pillars.

“While Amazon has multiple levers it can pull, the outlook is becoming tighter,” said GlobalData managing director Neil Saunders. “Amazon will remain very profitable, but the pace at which it can add to the bottom line appears to be waning.”

Amazon, like other tech giants investing in AI, is also spending more money—a factor investors are watching closely. Microsoft saw its shares slip this week due to earnings figures showing its crucial cloud computing unit did not grow as strongly as expected. Similarly, shares of Google parent Alphabet dropped on concerns about slowing ad revenue and rising costs.

“Meta stands out from other tech firms that have AI ambitions because it already generates substantial revenue from digital advertising,” said Sonata Insights founder and chief analyst Debra Aho Williamson.

“Unlike Google, which is dealing with changes impacting its core ad business, most of Meta’s AI investments are focused on enhancing advertising on its properties or developing new features that could eventually drive revenue.”

In June, Adam Selipsky, the head of Amazon’s AWS cloud computing business, unexpectedly left the company. In a memo to staff, Selipsky expressed leaving with “mixed emotions” but felt it was an appropriate time for him to transition. Matt Garman, Amazon’s sales and marketing executive, has taken over as head of AWS.

Amazon Web Services (AWS) is a key subsidiary of the tech giant, benefiting from the growing demand for remote computing and artificial intelligence services. AWS held 31 percent of the cloud computing market at the end of 2023, according to Stocklytics.

However, rivals Microsoft and Google are gaining ground, with the competition intensifying due to the deployment of ChatGPT-style AI technologies.

AWS is less known to the public compared to flagship AI brands like ChatGPT or Google’s Gemini, which are prominently featured across their respective product lines.