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Amazon's share price surged more than ten percent on Thursday after the online retail and cloud computing giant reported earnings that surpassed market expectations. The company announced a 13 percent increase in quarterly sales, reaching $180.2 billion across its operations. Net income climbed to $21.2 billion, up from $15.3 billion in the prior year. Further boosting investor confidence, Amazon forecast fourth-quarter sales between $206 billion and $213 billion, indicating growth of 10-13 percent.
The e-commerce giant's Amazon Web Services division, which recently suffered a global outage, saw revenues jump 20 percent to $33 billion in the third quarter, marking its fastest growth rate since 2022 as companies race to build AI capabilities.
Amazon's major rivals in the cloud computing space on Wednesday also reported sales increases in their cloud computing business, with all companies pointing to adoption of AI services as the main driver. The tech giants are all making huge investments to build up their AI computing capabilities, money that the companies insist will be justified by increasing adoption of AI tools and applications by customers across the globe.
While the company did not break out its specific investment in AI capabilities, Amazon said it increased year-on-year purchases of property and equipment by $50.9 billion, which is a massive jump in spending. Amazon also said it added 3.8 gigawatts of power capacity over the past year to support AI infrastructure -- more than any other cloud provider -- and launched a massive computing cluster with nearly 500,000 custom AI chips.
AI computing demands enormous amounts of electricity, far more than traditional computing, and can put a strain on local resources, notably water supplies needed for cooling data center activity.
Operating income, however, remained flat at $17.4 billion after Amazon took two major charges: $2.5 billion for a legal settlement with the Federal Trade Commission (FTC) and $1.8 billion in severance costs tied to planned job cuts.
Amazon said Tuesday it was reducing its workforce by 14,000 posts to streamline operations as it invests in artificial intelligence. The cuts are expected to target areas such as human resources, advertising, and management in a group that has 350,000 office positions, out of a total of more than 1.5 million employees.
