Fiona Nanna, ForeMedia News

3 minutes read. Updated 12:01AM GMT Mon, 4th November, 2024

Amazon’s shares surged by 6% on Friday, propelled by a stronger-than-anticipated quarterly earnings report. The tech giant’s robust performance in its cloud computing and advertising sectors fueled the stock’s ascent, sending shares to near-record levels, and marking a continued upward trend for Amazon’s stock, which has gained approximately 32% over the year.

In the quarter, Amazon’s revenue rose by 11%, reaching $158.9 billion and surpassing analysts’ projections of $157.2 billion as per LSEG’s analysis. The company’s earnings per share of $1.43 also outperformed the forecasted $1.14. Amazon’s stock briefly touched $200.50 on Friday, close to its all-time high of $200, which was reached in July, before closing at $197.93.

Cloud Computing and AI Investments Fuel Growth

Amazon Web Services (AWS), the company’s cloud division, experienced a 19% increase in sales, amounting to $27.4 billion for the quarter. Although this growth trailed the impressive figures posted by rivals Microsoft Azure and Google Cloud, which reported growth rates of 33% and 35%, respectively, AWS remains a key driver for Amazon’s revenue. The company’s substantial cloud business is central to its technology investments, enabling Amazon to compete in the high-demand artificial intelligence (AI) and data center markets.

Amazon’s capital expenditure surged by 81% year-over-year, totaling $22.62 billion, with significant funds allocated to data centers and high-powered Nvidia processors needed for its advanced AI applications. Amazon has already released several AI-driven products across its cloud and e-commerce segments, and expectations are high for a new AI-enhanced Alexa voice assistant, anticipated to bring even more innovation to consumers.

Advertising Segment Shines Amid Growing Competition

Advertising was another standout sector for Amazon, with sales growing by 19% to reach $14.3 billion in the quarter, meeting analysts’ expectations. This growth slightly outpaced Meta’s 18.7% advertising expansion rate and surpassed Google’s 15% growth in ad revenue, highlighting Amazon’s resilience and adaptability in the advertising space. The strong advertising performance demonstrates Amazon’s ability to effectively leverage its platform for advertisers, despite the competitive landscape.

Long-term Strategy: AI and Cloud Investments

Amazon’s CEO, Andy Jassy, highlighted that Amazon plans to allocate approximately $75 billion in capital expenditure in 2024, largely aimed at supporting infrastructure needed for emerging AI technologies. He described AI as a “once-in-a-lifetime type of opportunity,” expressing confidence that shareholders will recognize the long-term benefits of Amazon’s aggressive pursuit of AI-driven advancements. CFO Brian Olsavsky confirmed that the bulk of Amazon’s capex in 2024 will go towards bolstering its technological infrastructure.

Outlook for the Current Quarter

Looking ahead, Amazon has forecasted its revenue for the upcoming quarter to range between $181.5 billion and $188.5 billion, reflecting potential growth of 7% to 11% year-over-year. However, the midpoint estimate of $185 billion fell short of the $186.2 billion that analysts had anticipated. With the integration of AI across Amazon’s diverse revenue streams—spanning e-commerce, cloud, advertising, subscriptions, and online video—the company is positioned for continued growth in the evolving tech landscape.

Amazon’s sustained performance amid the dynamic demands of cloud computing, AI, and digital advertising signifies its ability to stay at the forefront of the tech industry while delivering value to its shareholders.

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Amazon’s shares surged by 6% as the company reported better-than-expected earnings, driven by growth in cloud computing and advertising. With an 11% revenue increase and a 19% growth in Amazon Web Services, Amazon continues to expand its tech footprint and invest in AI, securing its place at the forefront of the tech industry.