Amazon triples quarterly profit as cloud surges

• The company reported US$10.4 billion in profit on revenue of US$143.3 billion, compared with US$3.2 billion profit and US$127.4 billion in sales in Q1 last year
• Sales at Amazon online stores grew by seven per cent in the quarter despite competitive pressure from rivals such as Shein and Temu

E-commerce titan Amazon on Tuesday said profit in the first three months of 2024 tripled as its cloud, ads, and retail businesses thrived.

Amazon shares were up about one per cent in aftermarket trades that followed release of the earnings figures, with Wall Street keeping a close eye on the impact of AI as well as costs involved.

“It was a good start to the year across the business,” Amazon chief executive Andy Jassy said in an earnings release.

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The Seattle-based company reported US$10.4 billion in profit on revenue of US$143.3 billion, compared with a profit of US$3.2 billion on US$127.4 billion in sales in the same period a year earlier.

“Amazon opens its new fiscal year with a robust set of numbers that show it has mostly brushed off pressures in the consumer economy,” GlobalData managing director Neil Saunders said in a note to investors.

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Sales at Amazon online stores grew by seven per cent in the quarter despite competitive pressure from rivals such as Shein and Temu, according to Saunders.

“Our customer data still shows that Amazon is a focal point for those consumers wanting value for money and convenience,” Saunders said. “We also believe that Prime members are leaning more heavily into Amazon to maximise value from their subscriptions.”

Growth in online store sales indicated last year’s turnaround at Amazon’s e-commerce business is continuing, according to Emarketer senior analyst Blake Droesch.

“While the core e-commerce business is no longer the biggest growth driver, it remains an essential component of the Amazon flywheel, particularly in propelling its ad business,” Droesch said.

An Amazon fulfillment center in Kent, Washington, US, October 24, 2018. Photo: Reuters

Jassy said the allure of AI capabilities was getting companies to bring infrastructure up to date relying on Amazon’s AWS cloud computing division, which is on track to bring in a hundred billion dollars over the course of the year.

“We’ve seen considerable momentum on the AI front,” Jassy said on an earnings call. “Companies are pursuing this relatively low hanging fruit of modernising their infrastructure.”

AWS revenue in the recently ended quarter was US$25 billion compared with US$21.4 billion in the same period last year, the earnings figures showed.

Jassy also pointed to Amazon’s young ad business that was gaining momentum at its online shop and Prime streaming television service. Ad sales brought in US$11.8 billion in an increase of 24 per cent from the same quarter a year earlier, Amazon reported.

The tech giant has also been driving down costs, he added, eliminating some 27,000 jobs last year.

Amazon’s shares have risen by nearly 75 per cent in the past 12 months as investors applauded its aggressive cost-cutting, an increase in sales and the potential of its cloud computing platform in the coming AI era.

The company founded by Jeff Bezos is also testing an AI chatbot named Rufus that provides shopping tips to US mobile app customers. Meanwhile, generative AI features for sellers help them create product listings.

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The company plans to invest billions of dollars in AWS datacenters in Mexico, Saudi Arabia and the US in coming years, according to the earnings release.

Amazon capital expenditures are expected to “meaningfully increase” this year, driven by investing in AWS and AI, chief financial officer Brian Olsavsky said on the earnings call.

Amazon’s exceeding of market expectations comes after Microsoft last week reported solid earnings as it continued its aggressive push into artificial intelligence. The embrace of AI has boosted sales of its key cloud services, such as Azure, a rival of AWS.

Like most tech titans, Amazon faces increased regulatory scrutiny. It is being sued by the top US antitrust regulator, that accuses the online retail giant of running an illegal monopoly by strong-arming independent sellers on its platform and stifling potential rivals.

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