(San Francisco) Driven by cloud and AI, Amazon doubled its quarterly profits, but disappointed in its core business as the market expects solid performances from technology groups investing billions in generative artificial intelligence (AI).
The online retail giant announced Thursday that it had generated revenue of $148 billion in the second quarter, up 10% year-on-year but slightly below analysts’ forecasts.
Its net profit came to 13.5 billion, double that of a year ago, thanks to the strong margins of its cloud (remote computing) business.
Amazon shares were down more than 5% in after-hours trading on the New York Stock Exchange on Thursday.
“We continue to make progress in many areas, but especially in the continued re-acceleration of growth in AWS,” Amazon’s cloud business, said group CEO Andy Jassy, quoted in the earnings release.
AWS revenue grew 19% to $26.3 billion, with the subsidiary generating $9.3 billion in operating profit (a key indicator of profitability), or two-thirds of the group’s total of $14.7 billion.
The world’s number one in cloud computing, Amazon has nevertheless fallen behind the two other giants in the sector, Microsoft and Google, in generative AI.
Both companies are leading the race in designing templates and applications that can produce text, images and other content on simple requests in everyday language.
Cloud Greedy
The cloud is essential in the deployment of these tools for businesses and individuals, hence massive investments in new ad-hoc data centers, which are increasingly energy-hungry.
But these huge expenses worry shareholders, who are keen to quickly see commensurate commercial returns.
“Even though we’re investing significantly in AI and infrastructure, we’d like to have more capacity than we have today,” Jassy acknowledged Thursday night during a conference call with investors.
“We are investing heavily in all areas in AI and we will continue to do so,” he said.
In April, Amazon warned that investments would increase, beyond the $14 billion already spent in the first quarter, mainly on AWS and generative AI.
But the technology “already represents annual revenues of several billion dollars,” assured Andy Jassy.
“AWS’s strategic investments in AI, to defend its lead over Microsoft and Google in the cloud, are well received by the market,” says Sky Canaves of Emarkerter.
At Microsoft, king of the AI revolution for some analysts, quarterly sales of its cloud disappointed on Tuesday, increasing by 29% over a year, less than the 31% expected.
Core business
Google also had everything going for it, except for YouTube’s revenue, which fell short of expectations.
Only Meta (Facebook, Instagram) really stood out on Wednesday, thanks to its targeted advertising sales, which are increasingly attractive thanks to AI.
The social media giant’s net profit soared 73% year-on-year to $13.5 billion in the second quarter.
“If a company is showing strong results in its core business, its investments in AI are viewed more positively,” commented Debra Aho Williamson of Sonata Insights.
“But if the core business shows signs of weakness, as we saw last week with YouTube, the move may seem riskier.”
Amazon’s core business, its e-commerce platform, saw its revenues increase by 9% to $90 billion in North America, including $5 billion in operating profit.
The company continues to attract large numbers of customers, thanks in particular to its ultra-fast delivery times. But it is under threat from Chinese discount sales platforms Temu and Shein.
According to CNBC, the group is considering launching a new section on its platform, dedicated to low-cost fashion and other inexpensive products made in China, to allow Chinese merchants to sell directly to American consumers.