Amazon’s Quarterly Profit Doubles, But Sales Fall Short of Expectations
Amazon announced on Thursday that its profit for the recent quarter doubled to $13.5 billion, largely due to the renewed momentum of its AWS cloud computing business.
Despite this impressive profit, Amazon’s sales of $148 billion narrowly missed market expectations, causing shares to fall more than four percent to $176.50 in after-market trading.
“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 chief executive Andy Jassy.
AWS, Amazon’s cloud computing unit, saw revenue grow to $26.3 billion, up from $22.1 billion in the same period a year earlier. However, revenue from ads on the platform was $12.7 billion, falling short of the market’s $13 billion prediction.
Retail, ads, and cloud computing are Amazon’s primary 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.”
Like other tech giants investing in AI, Amazon is also increasing its spending, a factor closely watched by investors. Microsoft experienced a similar scenario this week, with its shares slipping after earnings revealed slower-than-expected growth in its cloud computing unit. Google’s parent company, Alphabet, also saw its shares drop due to concerns over slowing ad revenue and rising costs following its earnings release.
“Meta stands out from other tech firms that have AI ambitions because it already brings in a massive amount of revenue from digital advertising,” said Sonata Insights founder and chief analyst Debra Aho Williamson. “Unlike Google, which is grappling with making changes that will impact its core ad business, most of Meta’s AI investments are either aimed at making advertising on its properties work better, or at building new features that could eventually become revenue drivers.”
In a significant development, Adam Selipsky, head of Amazon’s AWS cloud computing business, left the company unexpectedly in June. In a memo to staff, Selipsky expressed “mixed emotions” about his departure but indicated that “given the state of the business and the leadership team, now is an appropriate moment for me to make this transition.”
Matt Garman, Amazon’s sales and marketing executive, has taken over as head of AWS. AWS, a key subsidiary of Amazon, is capitalizing on 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, but competitors Microsoft and Google are gaining ground.
The competition has intensified with the advent of ChatGPT-style artificial intelligence, which cloud companies are offering to clients interested in AI advancements. However, AWS remains less well-known to the public compared to flagship AI brands like ChatGPT or Google’s Gemini, which are being integrated across those firms’ product lines.