Amazon's Cloud Growth Accelerates, But Q3 Earnings Miss Estimates
The e-commerce giant saw its crucial AWS division surge, yet overall quarterly results and holiday outlook fell short of analyst expectations.
Amazon on Thursday reported third-quarter results that narrowly missed Wall Street expectations, though its dominant cloud computing unit, Amazon Web Services (AWS), posted its fastest growth in nearly five years. The company also issued a cautious sales outlook for the critical fourth quarter, which includes the busy holiday shopping season.
AWS sales surged 39.3% in the quarter ended Sept. 30, a notable acceleration from the 37% growth seen in the previous quarter. This strong performance from its cloud division, a key driver of Amazon's profitability, did little to offset concerns about the company's core e-commerce business. Shares fell more than 6% in after-hours trading following the announcement.
Investors are closely monitoring Amazon's spending on artificial intelligence, which CEO Andy Jassy previously stated would reach $220 billion. This investment includes outlays for robots, semiconductors, and satellites, a significant increase from the $200 billion plan announced in February and a stark rise from the $128 billion spent in the entirety of the previous year. Jassy had indicated that the higher cost of memory chips was a primary driver for this increased capital expenditure, noting that even at this level, Amazon anticipated insufficient capacity to meet demand.
The company reported net income of $20.69 billion, or $1.89 per share, compared to $21.19 billion, or $1.95 per share, in the same period last year. Total sales rose to $201.94 billion from $180.17 billion a year ago. Analysts had projected earnings of $1.97 per share on sales of $202.2 billion.
For the fourth quarter, Amazon forecast net sales between $240 billion and $247 billion, representing a 12% to 16% increase year-over-year. This range fell slightly below the $244.16 billion anticipated by analysts.
The broader technology sector has faced scrutiny, with companies like Alphabet also reporting weaker-than-expected summer growth and increased cash burn. These concerns are casting a shadow over the artificial intelligence industry, which has seen substantial investment in data centers and AI chips.