Equities
AWS leads with 17% revenue growth to $25.04B, driven by AI demand; Amazon invests $4B in AI, advertising revenue up 24%.
By Alex P. Chase
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Amazon Web Services (AWS), the cloud computing division of Amazon, has reported a significant 17% year-over-year revenue increase in the first quarter, totaling $25.04 billion. This growth exceeded the expectations of Wall Street analysts, who had predicted AWS sales to be around $24.49 billion, according to a survey by StreetAccount. The acceleration from a 13% increase in the previous quarter underscores AWS's growing dominance in the cloud sector. AWS now accounts for 17% of Amazon's total revenue, which reached $143,313 billion for the period. The cloud unit has proven to be a major profit generator for Amazon, contributing $9.42 billion in operating income, or roughly 62% of Amazon's total. This figure surpassed the analysts' expectations of $7.52 billion in AWS operating income. Additionally, AWS's operating margin expanded to 37.6%, marking the widest margin reported since at least 2014.
In a strategic move to bolster its position in the artificial intelligence (AI) sector, Amazon announced a $4 billion investment in AI startup Anthropic during the quarter. This investment highlights Amazon's commitment to advancing AI technologies and positions the company as a key player in the AI technology race against competitors such as Google and Microsoft. Anthropic, which utilizes AWS chips for training AI models, has been acknowledged by AWS CEO Adam Selipsky for offering some of the "leading models in the market right now" in specific areas. This investment underscores Amazon's strategy to remain at the forefront of AI development, competing with other tech giants that have also made significant investments in AI, including partnerships with Anthropic and OpenAI.
Amazon's advertising unit has shown impressive growth, with a 24% increase in revenue in the first quarter, reaching $11.8 billion up from $9.5 billion a year earlier. This growth exceeded the expectations of analysts, who had forecasted $11.7 billion for the quarter, signaling a strong recovery in the digital advertising market. The advertising sector's resurgence is indicative of a broader industry trend, with other major digital advertising companies like Meta, Alphabet, and Snap also reporting better-than-expected revenue growth. Amazon's total revenue for the period was $143.3 billion, marking a 13% increase from the previous year. The company is increasingly relying on its advertising business for growth and profit as it seeks to diversify beyond its core online retail and cloud computing services.
"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)."
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