After months of anxiety over whether Amazon could keep up with Microsoft and Google in the cloud race, the company finally put a number to its answer
Matthias Balk/picture alliance via Getty Images
Amazon $AMZN’s cloud just cleared. The company posted $180.2 billion in revenue, a $1.95 EPS, and 20% growth in Amazon Web Services (AWS) — its strongest pace in more than a year. The beats landed across the board: revenue up 13% from a year earlier, profit above expectations, and guidance for the holiday quarter steady to slightly higher.
Shares jumped around 13% in after-hours trading as Wall Street recalibrated: Maybe the world’s largest retailer is also back to being one of its most formidable cloud companies.
And after months of anxiety over whether Amazon could keep up with Microsoft $MSFT and Google $GOOGL in the cloud race, the company finally put a number to its answer. AWS’ 20% revenue jump to $33 billion marked its fastest growth in more than a year and came in above analysts’ expectations of around 18% — a relief to investors who had watched Microsoft’s Azure and Google Cloud pull away. While both Microsoft and Alphabet reported stronger cloud numbers yesterday — Azure grew by 40%, and Google Cloud by 34% — this quarter, the gap narrowed. Analysts had been treating 20% as the magic number for the stock’s comeback story.
Amazon’s answer wasn’t just price cuts or contracts — it was scale. And that scale is the story. This year, the company has poured around $100 billion into data-center build-outs and chip capacity, adding 3.8 gigawatts of power and expanding its in-house silicon lineup — the kind of build-out that makes its cloud business look less like a software unit and more like a national utility. The company said its custom Trainium2 chips are fully subscribed and that its Project Rainier cluster — roughly half a million accelerators built for Anthropic — is already under construction.
“We continue to see strong momentum and growth across Amazon as AI drives meaningful improvements in every corner of our business,” CEO Andy Jassy said in the press release. “AWS is growing at a pace we haven’t seen since 2022.” On the earnings call, Jassy said AWS had increased capacity in the quarter and plans to double capacity by 2027, with rising customer interest in Trainium.
Analysts were quick to recalibrate. Ethan Feller, stock strategist at Zacks Investment Research, said in a note that this “banner” quarter could be “a turning point for investment sentiment and set the stage for Amazon to reclaim a leadership role among large-cap tech stocks heading into year-end.”
Operating cash flow rose 16% to $130.7 billion, but free cash flow slipped to $14.8 billion as capital expenditures surged roughly $51 billion year-over-year — a trade-off between margin and muscle that Amazon seems happy to make.
The rest of the company largely did its part. North America sales rose 11% to $106 billion, international sales climbed 14%, and advertising once again served as the quiet profit center, printing high-margin growth. (It jumped 24% to $17.7 billion.) On the call, Jassy also touted Prime Video ads, especially in live sports, as a possible next leg of high-margin growth.
Operating income hit $17.4 billion, nearly level with last year’s number, $4.3 billion in one-time costs, including a $2.5 billion FTC settlement and $1.8 billion in severance charges “primarily related to planned role eliminations.” Excluding those two charges, operating income would have topped $21 billion.
On Tuesday, the company announced that roughly 14,000 corporate roles would be eliminated — about 4% of the company’s white-collar headcount. On the call, Jassy said that the job cuts were culture-driven, not “financially driven.” He said Amazon’s growing headcount could “weaken the ownership” of employees “doing the actual work” and slow down decision-making. Amazon, he said, wants an organization that is fast and flat — as he recasts the company’s workforce for the AI era he has previously promised is “the most transformative since the internet.”
For the holiday quarter, Amazon guided revenue between $206 billion and $213 billion and operating income of $21 billion to $26 billion.
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