AI capabilities have once again accelerated AWS's growth rate, now at a pace of US$100 billion (NZ$170 billion).Photo/Getty Images
Amazon reported strong first-quarter results, driven by growth in its cloud computing division and new ad spending from its Prime Video streaming service.
The Seattle-based e-commerce giant said it generated revenue of US$143.31 billion (NZ$243.62 billion) in the first three months of this year, an increase of 13% compared to the same period last year. Net profit was US$10.43 billion (NZ$17.73 billion), or 98 cents (NZ$1.67) per share.
That was well above Wall Street analysts' expectations of 84 cents (NZ$1.42) per share, FactSet said.
“This year is off to a good start across our business, and you can see that in both our improved customer experience and our financial results,” Amazon CEO Andy Jassy said in a statement.
Overall, U.S. consumer spending continued to grow despite higher prices and higher borrowing costs due to Federal Reserve interest rate hikes.
Amazon's U.S. customers are “very cautious” about their spending, Chief Financial Officer Brian Olsabsky said.
He noted that the company was seeing lower spending “particularly” in Europe as consumers cut deals in search of bargains.
Apart from its core retail business, Amazon's cloud computing arm Amazon Web Services posted sales of US$25.04 billion (NZ$42.56 billion) in the first quarter, up 17% year-on-year. It was announced that.
AWS, whose customers are mostly enterprises, is a key part of Amazon's strategy in the artificial intelligence race among big tech companies.
Growth in the sector slowed last year as companies cut costs amid concerns about the economy. But Amazon is using its AI services to buck that trend and attract more companies to its cloud business.
Jassy said AI capabilities have once again accelerated AWS's growth rate and it is now on pace to reach US$100 billion (NZ$170 billion) in annual revenue.
Hours before Amazon released its earnings report on Tuesday, the company announced the full rollout of a business chatbot called Q that is said to help employees be more productive at work.
Last month, the company completed a US$4 billion (NZ$6.8 billion) investment in San Francisco-based AI startup Anthropic, an OpenAI competitor in partnership with Microsoft.
Anthropic is working with Amazon to develop so-called foundational models that underpin its AI technology.
Revenue from the company's online advertising business also jumped 24%, with much of that coming from sponsored product ads, Olsavsky said.
He said Amazon, which started running ads on Prime Video in late January, currently has “low numbers” of ads on its streaming service compared to TV and other streaming providers. Mr Olsavsky said things were going well because customers could pay an additional fee of US$2.99 (NZ$5.08) per month to avoid advertising, adding: “Many people who don't currently use Amazon's advertising services “It's attracting new advertisers.”
(Ads are not yet available on Prime Video in New Zealand, and Amazon says they will not be available this year.)
Shares rose about 2% in after-hours trading.
Under Jassy, Amazon cut costs in various parts of its business to maintain profits.
This year, the company cut hundreds of positions across AWS, Prime Video, and MGM Studios. Its subsidiaries, popular social media platform Twitch and audiobook service Audible, also laid off employees.
Additionally, Amazon also faces regulatory hurdles. In January, the company called off a deal to buy robot vacuum cleaner maker iRobot after it faced regulatory hurdles in Europe. The company is also being sued by the Federal Trade Commission, citing antitrust concerns.
Amazon said it expected second-quarter net sales to be between US$144 billion (NZ$244.8 billion) and US$149 billion (NZ$253 billion). Analysts expected US$150.2 billion (NZ$255.3 billion), according to FactSet.
