Amazon announced on Thursday that its quarterly profit has doubled to $13.5 billion, bolstered by the renewed momentum of its Amazon Web Services (AWS) cloud computing business. The e-commerce giant reported sales of $148 billion, which fell just short of lofty market expectations. Despite the impressive profit growth, Amazon’s shares slid 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. Revenue for AWS grew to $26.3 billion, up from $22.1 billion in the same period a year earlier, according to the company’s earnings figures. AWS’s performance is a significant contributor to Amazon’s overall profitability. The company’s advertising revenue reached $12.7 billion, slightly below market predictions of $13 billion. Retail, advertising, and cloud computing remain Amazon’s key financial pillars. “While Amazon has multiple levers it can pull, the outlook is becoming tighter,” said Neil Saunders, Managing Director at GlobalData. “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 artificial intelligence (AI), is increasing its spending, a factor that investors are watching closely. Earlier this week, Microsoft saw its shares slip after earnings figures showed that its crucial cloud computing unit did not grow as strongly as expected. Similarly, shares of Google parent Alphabet dropped due to concerns that ad revenue was slowing while costs were rising. “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 Debra Aho Williamson, founder and chief analyst at Sonata Insights. “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 June, Adam Selipsky, who was leading Amazon’s expansion into AI as head of AWS, unexpectedly left the company. In a memo to staff, Selipsky expressed “mixed emotions” about his departure but noted 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 is a key subsidiary of Amazon, capitalizing on the growing appetite among businesses for cloud computing and AI 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 their cloud offerings. The competition has intensified with the deployment of ChatGPT-style AI services that cloud companies are offering to clients eager to embrace the AI revolution. While AWS is less known to the public, Amazon does not have flagship AI brands such as ChatGPT or Google’s Gemini that are being integrated across those firms’ product lines. As the tech industry continues to evolve rapidly, Amazon’s investment in its core businesses and emerging technologies like AI will be critical to maintaining its competitive edge in the global market.
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