San Francisco (United States) (AFP) – Amazon’s share price skyrocketed by more than ten percent on Thursday after the online retail behemoth reported better than expected earnings, powered by surging demand for its cloud computing services. Quarterly sales rose 13 percent to $180.2 billion across the company, it said. Net income climbed to $21.2 billion from $15.3 billion a year earlier. Stoking investor sentiment, the company forecast fourth-quarter sales of $206-$213 billion, representing growth of 10-13 percent.
The e-commerce giant’s Amazon Web Services division, which recently suffered a global outage, saw revenues jump 20 percent to $33 billion in the third quarter, marking its fastest growth rate since 2022 as companies race to build AI capabilities. Amazon’s major rivals in the cloud computing space, Microsoft and Google, on Wednesday also reported sales increases in their cloud computing business, with all companies pointing to adoption of AI services as the main driver. The tech giants are all making huge investments to build up their AI computing capabilities, money that the companies insist will be justified by increasing adoption of AI tools and applications by customers across the globe.
While the company did not break out its specific investment in AI capabilities, Amazon said it increased year-on-year purchases of property and equipment by $50.9 billion, which is a massive jump in spending. “The significant acceleration of AWS growth should help dispel some of the concerns that Amazon has been failing to keep up with (Microsoft) Azure and Google Cloud,” said Emarketer principal analyst Sky Canaves. “A key question will be whether Amazon plans to further increase its already massive (capital expenditure) spending on AI infrastructure in light of the recent announcements from its rivals.”
Amazon also said it added 3.8 gigawatts of power capacity over the past year to support AI infrastructure — more than any other cloud provider — and launched a massive computing cluster with nearly 500,000 custom AI chips. AI computing demands enormous amounts of electricity, far more than traditional computing, and can put a strain on local resources, notably water supplies needed for cooling data center activity. “In our view, Amazon is right to make these investments as they will help provide the company with new avenues for growth and ensure it remains competitively sharp,” said Neil Saunders, Managing Director of GlobalData.
Operating income, however, remained flat at $17.4 billion after Amazon took two major charges: $2.5 billion for a legal settlement with the Federal Trade Commission (FTC) and $1.8 billion in severance costs tied to planned job cuts. Amazon said Tuesday it was reducing its workforce by 14,000 posts to streamline operations as it invests in artificial intelligence. The cuts are expected to target areas such as human resources, advertising, and management in a group that has 350,000 office positions, out of a total of more than 1.5 million employees.
The settlement with the FTC was over long-running allegations from the US regulator that it used deceptive practices to enroll consumers in Amazon Prime and made it difficult to cancel subscriptions. The online retail giant, which admitted no wrongdoing in the settlement, paid $1.5 billion into a consumer fund for refunds and $1 billion in civil penalties. Shortly after the results landed, Amazon’s share price was up by 11 percent in after-hours trading.
© 2024 AFP
