Amazon shares gained ground in late trading Thursday after the company posted better-than-expected financial results for the September quarter.
Amazon (ticker: AMZN) said third-quarter sales were $143.1 billion, up 13% from a year ago, accelerating from 11% growth in the June quarter, and above the high end of the company’s guidance range.
Profits were 94 cents a share, well above the consensus of 58 cents. Net income of $9.9 billion included a $1.1 billion pretax noncash gain on the company’s stake in Rivian Automotive (RIVN).
Amazon Web Services revenue was $23.1 billion, up 12.3% from a year ago, which was about in line with Wall Street estimates, and consistent with the 12.2% increase one quarter earlier.
Amazon CFO Brian Olsavsky said in a call with reporters that the company increased AWS revenue by about $900 million versus three months earlier. He also noted that customers continue to focus on spending optimisation, but that the process is slowing down. He declined to say whether the growth rate for AWS has now bottomed.
Amazon shares were trading around breakeven heading into the company’s conference call late Thursday, but they moved higher after CEO Andy Jassy said on the call that AWS booked some large contracts late in the third quarter. They won’t start showing up in results until the fourth quarter, he said.
The stock was up 4.6% in late trading as of 6:15 p.m.
Heading into the earnings report, AWS growth had decelerated for six straight quarters, falling to 12.2% in the June quarter, from 39.5% in the last quarter of 2021. The slowing growth reflects a recent focus from cloud customers on “optimising” their cloud spending, figuring out how to get more value from their growing cloud outlays.
This week’s results from cloud rivals Alphabet (GOOGL) and Microsoft (MSFT) both noted that the optimization trend is continuing. The Google Cloud business posted disappointing results in the quarter, while Microsoft topped expectations. Amazon largely split the difference. Amazon bulls have expected AWS growth to begin accelerating soon as corporate spending budgets loosen and a focus on AI workloads expands, but there was no big jump in the latest quarter.
Operating income was $11.2 billion, well above the company’s forecast range of $5.5 billion to $8.5 billion. That incudes an operating profit in North America of $4.3 billion, reversing a loss of $400 million in the year ago quarter. AWS had an operating profit of $7 billion, up from $5.4 billion in the year-earlier period.
“We had a strong third quarter as our cost to serve and speed of delivery in our stores business took another step forward, our AWS growth continued to stabilise, our advertising revenue grew robustly, and overall operating income and free cash flow rose significantly,” Amazon CEO Andy Jassy in a press release.
Shares of Amazon were up 3.4% in late trading following the report.
Online store sales were $57.3 billion, up 7%, improving from 4% growth in the June quarter, while third-party services revenue was $343 billion, up 20%, versus 18% growth in the June quarter.
Amazon said subscription services revenue—mostly Amazon Prime—was $10.2 billion, up 14%. Sales at physical stores were $5 billion, up 6%.
Advertising revenue jumped 26% in the quarter, from 22% in the June quarter, to $12.1 billion. Olsavsky said the company isn’t seeing an impact from geopolitics. That’s a contrast from Meta, which noted on its earnings call Wednesday that the company was seeing some slowdown in spending tied to the outbreak of violence in the Middle East.
Olsavsky noted that ad growth has outpaced overall company growth, driven by improved targeting and higher click-through rates.
For the fourth quarter, Amazon sees sales of between $160 billion and $167 billion, with operating income ranging from $7 billion to $11 billion. Wall Street estimates for the quarter have called for revenue of $167.2 billion, up 12%, with operating income of $8.7 billion.
Amazon shares were down 1.5% in Thursday’s regular session.
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Amazon, Google, Microsoft and Meta pour billions into artificial intelligence, undeterred by DeepSeek’s rise
Tech giants projected tens of billions of dollars in increased investment this year and sent a stark message about their plans for AI: We’re just getting started.
The four biggest spenders on the data centers that power artificial-intelligence systems all said in recent days that they would jack up investments further in 2025 after record outlays last year. Microsoft , Google and Meta Platforms have projected combined capital expenditures of at least $215 billion for their current fiscal years, an annual increase of more than 45%.
Amazon.com didn’t provide a full-year estimate but indicated on Thursday that total capex across its businesses is on course to grow to more than $100 billion, and said most of the increase will be for AI.
Their comments in recent quarterly earnings reports showed the AI arms race is still gaining momentum despite investor anxiety over the impact of China’s DeepSeek and whether these big U.S. companies will sufficiently profit from their unprecedented spending spree.
Investors have been especially shaken that DeepSeek replicated much of the capability of leading American AI systems despite spending less money and using fewer and less-powerful chips, according to its Chinese developer. Leaders of the U.S. companies were unbowed , touting advances in their own technology and arguing that lower costs will make AI more affordable and grow the demand for their cloud computing services, which AI needs to operate.
“We think virtually every application that we know of today is going to be reinvented with AI inside of it,” Amazon Chief Executive Andy Jassy said on Thursday’s earnings call.
Here is a breakdown of each company’s plans:
Amazon said a measure of its capex that includes leased equipment rose to a record of about $26 billion in the final quarter of 2024 , driven by spending in its cloud-computing division on equipment for data centers that host AI applications. Executives projected it would maintain the fourth-quarter spending volume in 2025, meaning an annual total of more than $100 billion by that measure.
The company—which gets most of its revenue from e-commerce and most of its profit from cloud computing—also projected overall sales for the current quarter that missed analysts’ expectations. Its shares slid about 4% in after-hours trading Thursday. The stock rose more than 40% in 2024 and was up nearly 9% this year before its earnings report.
Jassy said AI has the potential to propel historic change and that Amazon wants to be a leader of that progress.
“AI represents for sure the biggest opportunity since cloud and probably the biggest technology shift and opportunity in business since the internet,” Jassy said.
Google shares are down about 7% since its earnings report Tuesday, which showed disappointing growth in its cloud-computing business. Still, parent-company Alphabet said it is accelerating investments in AI data centers as part of a surge in capital expenditures this year to about $75 billion, from $52.5 billion in 2024. The spending will go to infrastructure both for Google’s own use and for cloud-computing clients.
“I think part of the reason we are so excited about the AI opportunity is we know we can drive extraordinary use cases because the cost of actually using it is going to keep coming down,” said CEO Sundar Pichai .
AI is “as big as it comes, and that’s why you’re seeing us invest to meet that moment,” he said.
Microsoft has said it plans to spend $80 billion on AI data centers in the fiscal year ending in June, and that spending would grow further next year , albeit at a slower pace.
Chief Executive Satya Nadella said AI will become much more extensively used , which he said is good news. “As AI becomes more efficient and accessible, we will see exponentially more demand,” Nadella said.
Growth for Microsoft’s cloud-computing business in the latest quarter also disappointed investors, leaving its stock down about 6% since its earnings report last week.
Meta, too, outlined a sizable increase in its investments driven by AI, including $60 billion to $65 billion in planned capital expenditures this year, roughly 70% higher than analysts had projected. Shares in Meta are up about 5% since its earnings report last week.
CEO Mark Zuckerberg said investing vast sums will enable it to adjust the technology as AI advances.
“That’s generally an advantage that we’re now going to be able to provide a higher quality of service than others who don’t necessarily have the business model to support it on a sustainable basis,” he said.
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