Amazon with significantly higher profits, AI investments in the billions

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Amazon was once again able to significantly increase its sales figures and profits in the past quarter. This exceeded the stock market's expectations, causing the share price to jump slightly. The results for online advertising and the cloud business are in line with forecasts, but growth in these areas is higher than in the previous year and is seen as a positive sign. At the same time, Amazon is increasing its investments in artificial intelligence (AI) and data centers.

In the third quarter of this year, the Group's total sales increased by 11% year-on-year to 158.9 billion US dollars. In the same period in 2023, the figure was USD 143.1 billion, when Amazon more than tripled its profits. Profits have not risen as much recently, but have still grown significantly. Both operating profit and net profit are 55 percent higher than at this time last year.

More growth internationally, less growth in advertising

It is worth noting that Amazon is growing less strongly in North America than its international business. Sales figures rose by 9 percent in the domestic market, but by 12 percent internationally. Although operating profit increased by 33 percent in North America, internationally Amazon was able to turn the operating loss of 100 million dollars in the previous year into an operating profit of 1.3 billion dollars.

Amazon's online advertising is also on the rise. The advertising business has recently increased by 19 percent year-on-year to 14.3 billion dollars. This means that this service is growing significantly faster than Amazon's core business, retail. However, sales growth in online advertising was even higher in the previous five quarters and was previously consistently at least 20 percent. Advertising growth has therefore weakened somewhat recently.

Amazon Cloud is getting bigger, also thanks to AI investments

The cloud business of Amazon Web Services (AWS) has grown by 19 percent over the past three months and achieved a turnover of 27.5 billion dollars, according to a statement from the group. This was in line with the expectations of market experts. The operating profit of this division rose by almost 49 percent from 7.0 billion dollars in the previous year to 10.4 billion dollars. Nevertheless, Amazon's cloud business is growing more slowly than the competition. Microsoft's sales with Azure and other cloud services have recently risen by 33 percent, while Google Cloud has even grown by 35 percent.

This is probably one of the reasons why Amazon is investing heavily in its own data centers in order to be able to offer AI services, for example. Investments here have risen by 81 percent from 12.5 billion dollars in the previous year to 22.6 billion dollars most recently. For this year, Amazon CEO Andy Jassy is planning investments totaling 75 billion dollars, and he expects a further increase in 2025, reports CNBC. "The increases here are really driven by generative AI," he said in an interview with analysts.

Investors react with share purchases

For the current fourth quarter, Amazon expects sales figures of between 181.5 and 188.5 billion dollars. That would be 7 to 11 percent more than at the end of 2023, when Amazon quintupled its operating profit. This forecast is slightly below the expectations of market experts. Nevertheless, Amazon's share price rose by almost 6 percent in after-hours trading, after the stock had already risen by around 23 percent over the course of this year.

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