Amazon sales surge as company focuses on artificial intelligence
AI boom powered growth in its cloud-computing unit, helping the company shake off a post-pandemic slump
Amazon.com reported record first-quarter sales as the AI boom powered growth in its cloud-computing unit, helping the company continue to shake off last year’s post-pandemic slump.
Revenue rose 13% to reach $143.3 billion, an all-time high in the January-to-March period, and profit surged to $10.4 billion. Both figures exceeded Wall Street expectations.
Amazon CEO Andy Jassy has significantly reoriented the company to focus on AI innovations since falling behind Microsoft, Google and other peers in the space.
Earlier this month, in his annual letter to shareholders, he laid out his vision for how generative AI could be a critical building block in establishing Amazon’s next pillar of growth following its online retail Marketplace, Amazon Prime and its cloud-computing unit , Amazon Web Services.
Sales in the Amazon Web Services arm, known as AWS, a critically important profit center for the company, increased more than 17% in the first quarter to about $25 billion. The division’s operating profit rose nearly 84%.
Jassy said AWS’s AI capabilities are reaccelerating that business’s growth rate, which is now at $100 billion in annual revenue.
Amazon on Tuesday projected second-quarter sales overall of $144 billion to $149 billion, slightly below analyst expectations of $150.2 billion, according to FactSet.
“There’s a very large opportunity in front of us,” Jassy said on a conference call with analysts. “I don’t know if any of us has seen a possibility like this in technology in a really long time, for sure since the cloud, perhaps since the internet.”
Amazon’s stock rose 2% after hours. Through Tuesday’s close, the stock has risen about 15% so far this year.
Amazon’s latest quarterly results showed demand for its cloud services is once again increasing at a healthy clip, said
Daniel Morgan, senior analyst and portfolio manager at Synovus Trust.
“This puts Amazon on par with Alphabet and Microsoft in regards to reinvigorated growth back into the data center,” he said.
AWS sales had decelerated last year, after years of rapid expansion. Lower enterprise demand hurt the unit, though Amazon indicated it expected growth to pick up again as businesses responded positively to the company’s latest cloud offerings.
Investors have paid close attention to AI spending levels at the world’s largest technology companies, punishing those whose path to profitability is less clear. Alphabet’s Google, Microsoft and Meta Platforms all forecast significant capital spending increases , with Meta saying it would boost spending by up to $10 billion to support its AI investments. Meta shares fell more than 10% after it issued a relatively disappointing revenue forecast for the second quarter.
“We expect the combination of growth and high demand for GenAI to meaningfully increase year-overyear capital expenditures in 2024,” Chief Financial Officer Brian Olsavsky said on the conference call.
He said the $14 billion in capital expenditure during the first quarter will be the low point for the year. The majority of the spending will be on
AWS infrastructure and generative AI investment.
Amazon is a large investor in AI startup Anthropic, and AWS in November introduced an AI chatbot for companies that it calls Amazon Q. On Tuesday, the company said Amazon Q is now generally available through AWS.
Earlier this year, Amazon said it was launching an AI-powered shopping assistant named Rufus on its mobile app. Executives said it is designed to improve the shopping experience and enhance the search bar.
Amazon is dealing with multiple challenges, including a new wave of competition from fast-growing e-commerce companies and an antitrust lawsuit from the Federal Trade Commis- sion that could seek a breakup of the company.
In January, Amazon was forced to end its takeover deal with robotic vacuum maker iRobot after European officials planned to block the acquisition.
Amazon also is facing an order from the U.S. Consumer Product Safety Commission that could make it responsible for the safety of goods that it sells for outside vendors on its website and ships for them through its logistics network.
During the first quarter, operating income for the company’s North America unit jumped to almost $5 billion, from $898 million a year ago. Sales rose 12.3% to $86.3 billion in the segment.
“The top line has clearly turned the corner and regained momentum,” said Andrew Lipsman , founder of consulting firm Media, Ads + Commerce.
“And as e-commerce improves, advertising tends to improve, which drives the bottom line.”
Amazon said advertising revenue grew 24% to $11.82 billion. The growth comes after the company in January began showing ads on its Prime Video platform unless customers pay more.
Amazon said it released 20 films and series during the quarter, including the debut season of “Fallout,” which is based on a popular videogame franchise and attracted more than 65 million viewers worldwide. Amazon also said it plans to create a new series from popular YouTuber MrBeast.
The e-commerce company has invested billions of dollars into building out its Prime Video service, and acquired MGM for $6.5 billion in 2022.
Layoffs and leadership changes have colored Amazon’s recent history. Last year it laid off roughly 27,000 employees and in January the company eliminated hundreds more jobs across its film and television studio and its Twitch streaming platform in an effort to rein in costs. It hasn’t since announced further cuts. Amazon’s overall head count, including its army of warehouse workers, totaled 1.53 million at the end of 2023, slightly below its level a year earlier.
Jassy, who became CEO in 2021, has pushed to boost profits. He also has sought to strengthen Amazon’s supply chain by moving packages faster and placing warehouses closer to customers, as the company attempts to reduce delivery times and costs.
Revenue rose 13% to $143.3 billion, an all-time high in January-to-March period, and profit surged to $10.4 billion