Amazon on last Thursday, October 31, released information about its earnings in the third quarter of the current year, which exceeded analysts’ preliminary expectations in large part due to the growth of the company’s business in the areas of cloud computing and advertising.
The revenue of the mentioned e-commerce giant, which is also currently one of the largest players in the global technology sector, for July-September 2024 was fixed at around $158.9 billion. This indicator showed an increase of 11% compared to the result for the same period last year. It is worth noting that the preliminary forecast of LSEG provided that the revenue of the e-commerce giant for the three-month period ended September 30 would reach $157.2 billion.
Earnings per share in this case amounted to $1.43. At the same time, the preliminary forecast of LSEG provided that this figure would be equal to $1.14.
Amazon Web Services (AWS) generated $27.5 billion in revenue in the third quarter of 2024. This indicator showed an increase of 19% compared to the result for the same period last year. It is worth noting that the mentioned result coincided with StreetAccount’s preliminary estimate of AWS revenue for the third quarter of 2024. For the same period in 2023, the specified indicator of this Amazon business increased by 12% year-on-year. It is worth noting that AWS faced a slowdown in growth last year. This tendency was because customers reduced their budgets for the payment of related services due to increasing economic problems. However, AWS revenue continues to be on an upward trajectory. At the same time, this business of the e-commerce giant is showing growth, the pace of which is lower than similar indicators of competitors. For example, Microsoft recorded a 33% increase in revenue from Azure and other cloud services in the last fiscal quarter. A similar indicator for Google Cloud, which is part of Alphabet’s ownership structure, showed a growth of almost 35% in the third quarter of 2024.
Amazon’s revenue from the online advertising business for July-September of the current year was fixed at $14.3 billion. This indicator increased by 19% compared to the result for the same period in 2023. Also, the revenue of the mentioned business of the e-commerce giant corresponds to the preliminary estimate of StreetAccount. Amazon’s specified line of business has not yet made the company a leader in the global digital advertising market, but it has already been able to form competition against the largest players in the appropriate space. According to media reports, Google’s share of the mentioned market is 27.7%. The same Meta indicator is at 22.8%. The e-commerce giant’s share is 8.8%.
Amazon’s capital expenditures for the third quarter of 2024 amounted to $22.62 billion. This indicator increased by 81% compared to the result for the same period last year. The significant growth in capital expenditures is due to the fact that the company continues to invest in data centers and equipment such as Nvidia’s graphics processing units, which are necessary to power products based on artificial intelligence.
It is worth noting that Amazon has launched several AI products in its cloud business and e-commerce area. It is also currently expected that the company will soon announce a new version of its Alexa voice assistant based on generative artificial intelligence.
Amazon chief financial officer Brian Olsavsky said on an earnings call that most of the capital expenditures for 2024 are aimed at meeting the growing need for technological infrastructure. In this context, it is also worth paying attention to a kind of fundamental aspect of the current concept of the company’s activities. Amazon, as part of its financial actions, demonstrates a strong desire to develop, including as a technology firm. E-commerce and technology are closely related, but the company strives to be present on a large scale in both areas, not limited to business at their intersection.
Amazon chief executive officer Andy Jassy said during a call with analysts that the firm plans to spend about $75 billion on capital expenditures in the current year. Also, according to him, the corresponding indicator is likely to grow in 2025. Separately, he noted that in this case, the sharp increase is associated with generative artificial intelligence. In an appropriate context, Andy Jassy also underlined that it is a really unusually large, maybe once-in-a-lifetime type of opportunity. According to him, shareholders will feel good about this long-term perspective as the company aggressively pursues it.
As noted by the media, Andy Jassy seeks to reassure investors who are concerned about the potential prospect that investing in artificial intelligence will not have a positive result. It is worth noting that such sentiments are currently widespread. Around the world, investors are concerned about the issue of when exactly will massive financial injections into AI generate a return. The corresponding unrest began to intensify against the background of the fact that the receiving of the revenue in the area of artificial intelligence is not as fast as many expected. It has also become a problem for investors that there is still no definitive understanding of what form of existence machine intelligence will have at the peak stage of its technological evolution. Making financial injections in a product which prospects and limits of development are not fully known is perceived by many as a potentially risky action.
It is also worth noting that the AI industry requires significant investments. The process of developing artificial intelligence is very expensive. At the same time, it is worth noting that the prospects for AI cannot yet be unambiguously formulated, but at the same time, it is already obvious that this technology is groundbreaking and contains the potential to fundamentally change the world as an economic space, social environment, political plane, and cultural matter. Moreover, it is possible that in the process of its development, artificial intelligence will gradually transform into an independent form of consciousness existing in the virtual dimension of reality, capable of evolution at the expense of its own resources and surpassing human consciousness in terms of cognitive abilities, which means the prospect of deeper learning of the universe. These are ambitious futurological forecasts, but at the same time, the corresponding vision of the potential of AI is not utterly fantastic and categorically impossible from the point of view of perspectives of implementation. Obviously, against the background of the mentioned prospects, investing in artificial intelligence can potentially generate large-scale benefits.
Amazon predicts that its revenue for the fourth quarter of 2024 will range from $181.5 billion to $188.5 billion. In this case, it implies an increase of 7-11% year-on-year. It is worth noting that the average forecast of analysts surveyed by LSEG envisaged Amazon’s revenue for the fourth quarter of 2024 at around $186.2 billion.
The company’s operating income for the three-month period ended September 30 amounted to $17.4 billion. This indicator increased by 56% year-on-year. The corresponding result indicates that the e-commerce giant focuses on efficiency and continues cutting costs to lift the bottom line. It is worth noting that currently, in the context of corporate actions, cutting costs is one of the company’s main tasks. As part of this effort, more than 27,000 Amazon employees have been laid off since the beginning of 2022. The company is currently continuing to restructure its teams.
Against the background of data on the earnings of the e-commerce giant, the value of its shares on Friday, November 1, showed an increase of 6%. It is worth noting that for the year, the company’s securities rose in price by about 32%. On Friday, the shares of the e-commerce giant briefly reached $200,50. The corresponding indicator is close to the historical maximum. Its highest close was $200, a mark the stock hit twice in July. The stock closed at $197.93 on Friday.
As we have reported earlier, Amazon to Shut Down Speedy Brick-and-Mortar Delivery Service.
Serhii Mikhailov
Serhiiās track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.
