Amazon Web Services continues to be a significant contributor to Amazon’s overall operating profits, accounting for more than 60% of the company’s total operating profits. In the third quarter, AWS posted $10.4 billion in operating income, a 50% increase from the previous year, surpassing $10 billion for the first time. Revenue for AWS also rose by 19% to $27.4 billion in the same quarter. Amazon CEO Andy Jassy highlighted the significant reacceleration of AWS growth over the past four quarters, with AI playing a crucial role in driving this growth.
Jassy explained that AWS customers are focusing on modernizing their infrastructure from on-premises to the cloud to save money, innovate quickly, and enhance productivity. He emphasized that organizing data in the cloud environment is crucial for companies to be successful in generative AI at scale. AWS underwent a leadership transition earlier in the year, with Matt Garman taking over as CEO of the cloud unit from Adam Selipsky. Amazon’s quarterly results are often influenced by decisions made years earlier, reflecting the importance of long-term strategies.
AWS’s operating margin reached a new high of 38.1% in the quarter, indicating strong profitability as a percentage of sales. Comparatively, Google Cloud posted a quarterly operating margin of 17.1%, with $1.95 billion in profits on $11.4 billion in revenue. Microsoft also reported a 33% increase in revenue from Azure and other cloud services, with 12 percentage points of growth from artificial intelligence. Amazon CFO Brian Olsavsky attributed the boost in AWS margins to accelerating demand for services, cost efficiencies, and cautious hiring practices, alongside a strategic extension of server life.
Amazon is expecting approximately $75 billion in capital expenditures in 2024, with the majority of the spending directed towards technology infrastructure related to AWS. Jassy anticipates even higher capital spending in 2025 due to increased investment in generative AI. The company’s AI business is showing significant growth, with triple-digit percentage growth year-over-year, three times faster than AWS at a similar stage of evolution. Jassy is confident that the investment in AI will yield substantial long-term benefits for Amazon.
Overall, AWS’s growth remains robust, fueled by increasing demand for cloud services and a strategic focus on AI-driven solutions. The company’s strong financial performance in the cloud business is a key driver of Amazon’s overall profitability. With significant capital investment planned for the coming years, Amazon is positioning itself to capitalize on the growing demand for cloud services and emerging technologies such as generative AI. As competition in the cloud market intensifies, AWS continues to lead the way in innovation and profitability, setting a high standard for its competitors.
