Amazon.com (AMZN.O) reported that it has inked new partnerships and that growth in its cloud business is stabilizing. However, it cautioned that consumers are still cautious about spending as we approach the holiday quarter.
The company, which just released impressive third-quarter earnings supported by a recent marketing campaign and faster delivery, anticipated a gain in revenue over the crucial holiday season but might still need to catch up to Wall Street estimates.
After hours, the company’s shares fluctuated, rising, dipping, and climbing 5%.
Amazon is attempting to maintain its position as the largest online retailer and cloud provider in the world despite several obstacles to its operation.
To strengthen its cloud offering, the company has responded to competitors Google (GOOGL.O) and Microsoft (MSFT.O) by announcing plans to invest up to $4 billion in chatbot maker Anthropic and promoting an AI service that attracts thousands of customers.
Amazon has also rearranged its delivery network to place products nearer to customers, enabling it to complete purchases more quickly and affordably than in the past.
Amazon has encountered several concurrent difficulties, including limited household budgets, companies closely examining their cloud expenditures, and a lawsuit filed in September by the U.S. Federal Trade Commission alleging pricing manipulation and monopolistic practices. The company is contesting the claims.
In light of this, the business projected revenue for the crucial holiday quarter ending on December 31 to be between $160 billion and $167 billion. LSEG polled analysts, who predicted revenues at the top end of Amazon’s projection at $166.62 billion.
To a certain extent, Hargreaves Lansdown stock analyst Sophie Lund-Yates expressed optimism about consumer discretionary spending due to Amazon’s increase in seasonal hiring.
“It’s possible that there may be one last push in spending before a significant reduction in the coming year. Thus, there is a risk here that needs to be properly watched,” she stated.
The success of Amazon’s cloud computing branch is frequently correlated with its own. Amazon Web Services (AWS), a longtime profitable source, suffered a slowdown in growth in previous quarters. As its clients prepared for AI updates, rival Microsoft, the second-largest cloud provider by sales after Amazon, exceeded Wall Street projections this week.
Brian Olsavsky, the Chief Financial Officer at Amazon, stated during a conference call with reporters that efforts to assist clients in adjusting the amount of money they were spending in the cloud were “starting to slow down.”
In a conference call with investors, CEO Andy Jassy also mentioned that AWS was signing and closing deals at a faster rate, including significant expansions with both new and current clients. In an announcement, he noted, “Our AWS growth continued to stabilize.”
The business is also grabbing clients’ attention with “generative AI,” which works similarly to ChatGPT’s chatbot in that it can be instructed to create text, photos, and other types of material with human-like abilities. According to Jassy, over the next few years, generative AI should bring in tens of billions of dollars for AWS.
Against analysts’ projected revenue of $23.09 billion, AWS’s third-quarter revenue of $23.1 billion was realized.
Being mindful of the cost
LSEG data shows that Amazon’s entire sales for the third quarter increased by 13% to $143.1 billion, exceeding Wall Street projections of $141.41 billion. From $2.87 billion a year earlier to $9.9 billion in the third quarter, net income increased.
Despite decreasing discretionary spending, CFO Olsavsky stated that the company generally observed robust demand in sales categories, including beauty and wellness.
“We still see customers remaining cautious about price, trading down where they can and seeking out deals,” he stated.
Reduced inflation contributed to a portion of Amazon’s transportation expenditures. However, fuel expenses still had an impact, he said.
Amazon managed the situation with the aid of several initiatives. According to the corporation, its largest-ever sales day occurred during the third-quarter shopping frenzy known as Prime Day, and its biggest-ever October holiday start occurred during a subsequent promotion period.
Because it encourages customers to place larger, more frequent orders, Amazon’s same-day delivery services have also increased its profit margins. The retailer made significant investments in recent years to expand the service’s availability.
In the third quarter, Amazon’s North American sector saw an 11% growth in sales to around $88 billion. The company also recorded an operating profit of $4.3 billion in that region, up from an operating loss the previous year.
After that defeat, Amazon has made dramatic cost reductions. Following the announcement of 27,000 layoffs, or 9% of its approximately 300,000 employees, at the beginning of the previous year, the company has disclosed additional role reductions, including at Amazon Fresh outlets.
