Cloud growth is experiencing rapid acceleration, and profits are significantly increasing, partly due to advancements in artificial intelligence (AI).
On Friday, Amazon’s shares rose, increasing by as much as 7.6%. By 10:52 a.m. ET, the stock maintained a 7.1% increase. The surge was driven by optimistic results that exceeded many investors’ expectations.
Amazon’s CEO, Andy Jassy, has been focused on reducing expenses in recent years, and the results of these efforts were evident in the company’s third-quarter financial report. The company achieved a revenue of $158.9 billion, marking an 11% increase compared to the previous year, while earnings per share (EPS) reached $1.43, a 52% rise. Analysts had predicted a revenue of $157.3 billion and EPS of $1.16, making Amazon’s profitability standout. The company’s free cash flow, which increased by 123% to $47.7 billion, further showcased Jassy’s successful cost-cutting measures.
Amazon’s major business segments also reported positive outcomes. North American e-commerce sales increased by 9% to $95.5 billion, and international sales rose by 12% to $35.9 billion. Amazon Web Services (AWS) witnessed a 19% growth, amounting to $27.5 billion, driven by demand for generative AI. Additionally, digital advertising revenues increased by 19% to $27.4 billion.
Amazon’s recent recovery has been remarkable as the economic landscape stabilizes, encouraging increased spending by both consumers and businesses. This recovery benefits Amazon’s online retail, digital advertising, and cloud computing operations.
However, Amazon’s efforts in generative AI appear to have the most significant effect. During a recent conference call discussing the results, Jassy highlighted Amazon’s progress. He noted that in the past 18 months, AWS launched nearly twice as many machine learning and generative AI features compared to the combined efforts of other leading cloud providers. Jassy credits these advancements for revitalizing AWS’s growth, which had previously slowed and lost market share to competitors.
Despite the recent stock rally, Amazon’s shares are trading at less than three times next year’s projected sales, suggesting a promising opportunity for investors given the company’s multiple growth avenues.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vena holds positions in Amazon. The Motley Fool has investments in and recommends Amazon.
