Amazon ( AMZN ) kicked off the holiday season with steady growth as Amazon Web Services, its cloud division, continues to gain momentum amid the AI craze. During the July-September quarter, AWS generated $27.5 billion in revenue, up 19 percent from last year, and projects to generate $110 billion in revenue for the full year. AWS revenue grew 48.6 percent to $10.4 billion, making up the bulk of Amazon's operating income following the sale of North American stores. Amazon's total revenue jumped 11 percent to $158.9 billion, beating Wall Street estimates.
“The AWS team continues to make rapid progress in bringing AI capabilities to customers and building a great AI business,” said Amazon CEO Andy Jassy on an earnings call yesterday (Oct. 31).
AWS's revenue growth was fueled, in part, by the cloud provider's recent deals with several major companies, including Capital One, Sony, T-Mobile, and Toyota as customers demand more computing power to run their energy-intensive AI workloads . AWS customers now have access to the latest base models of Amazon's productivity AI platform Bedrock, including Claude 3.5 Sonnet and Meta's Llama 3.2. Customers also have access to custom silicon chips such as Graviton and Trainium through the cloud.
In addition to updated AI capabilities for businesses, Amazon introduced a slate of new AI productivity tools for consumers. In October, Amazon introduced a new line of Kindle e-book readers with an AI-powered notebook app that can summarize book pages with bullet points, and AI Shopping Guides, a tool online shoppers can use on the website Amazon to find the right products. Last month, the tech giant launched Project Amelia, an AI assistant retailers can use to answer questions about their inventory, sales and customer traffic.
“In the past 18 months, AWS has released nearly twice as many machine learning and genAI features as the other leading cloud providers combined,” Jassy said.
Still, investors have questioned when AWS will see a return on investment. Amazon spent $69.75 billion on buildings and services, a 27 percent jump from the $54.73 billion it spent during the same period last year. Amazon projects that it will spend a total of 75 billion dollars by the end of 2024, most of which will go to AWS's AI infrastructure such as chips and data centers, and expects to spend even more in 2025, according to Jassy.
The CEO assured investors that AWS is growing at an “accelerating rate” and must continue to invest in AI hardware to meet growing customer demand. Big investments in infrastructure like data centers, he adds, are “useful assets” that will last 20 to 30 years.
“I think we've shown over time that we can drive enough operating cash flow and free cash flow to make this a successful return on investment business,” Jassy said in response to questions about Amazon's big spending. “We expect the same thing to happen here with generative AI”
It's not just Amazon's cloud unit that's seeing growth. Sales from Amazon.com grew 7 percent to $61.41 billion, and sales rose 8 percent across all of its physical stores. Amazon's advertising services, too, jumped 19 percent to $14.3 billion following the release of ads on its Prime Video streaming service.
Looking ahead, Amazon will continue to expand its AI offerings. Jassy teased the new robotic capabilities that make shipping and packing easier across its fulfillment centers and revealed the productivity AI capabilities coming to its AI-home assistant Alexa.
“I think the next generation of these assistants and generative AI applications will be better not only at answering questions and summarizing, identifying and integrating data, but also at taking action,” Jassy said.
