Amazon’s cloud computing platform AWS may be doing more than just AI, and that may spell trouble for Alphabet and Microsoft.
Shares of Amazon rose by nearly 3% in after hours, trading at $180 per share, right after the e-commerce giant reported better-than-expected revenue for its first quarter. That increase was in part led by its AWS division and its advertising services, the company said in its earnings release. Shares of Amazon have risen 74% over the past year.
“The combination of companies renewing their infrastructure modernization efforts and the appeal of AWS’s AI capabilities is reaccelerating AWS’s growth rate (now at a $100 billion annual revenue run rate),” said Andy Jassy, Amazon’s CEO, in a statement.
Sales for the company’s AWS division grew 17% year over year to $25 billion during the quarter. That surge in sales could put Amazon in a good position to compete with AI leaders such as Microsoft and Alphabet.
Amazon’s Jassy told analysts during the company’s earnings call Tuesday that companies are pursuing its AWS platform because it is a “relatively low hanging fruit” that can help modernize a company’s infrastructure.
“Our AWS customers are excited about leveraging generative AI to change their customer experiences and businesses,” Jassy said. “We see considerable momentum on the AI front.”
Amazon appears to be banking on its AWS footprint. In its earnings release, the company said that plans to invest $5.3 billion in Saudi Arabia and $5 billion in Mexico over the next several years to build new infrastructure centers. It also plans to invest $10 billion to build two data centers in Mississippi. Those two centers are projected to create at least 1,000 jobs in the state, the company said.
Moreover, Jassy said during the company’s call that Amazon will continue to focus on its advertising efforts to include more of its sponsored content on its Prime Video platform. Its ad business is driving sales, “despite it’s very early days.”
Seattle, Washington-based Amazon beat Wall Street’s expectations. For the period, it reported revenue of $143.3 billion, about $0.98 cents a share. Analysts forecasted it would earn $142.5 billion, or roughly $0.84 cents a share, according to FactSet.