By Greg Bensinger and Yuvraj Malik
(Reuters) -Amazon.com reported quarterly results above Wall Street’s expectations on Tuesday, as interest in artificial intelligence helped drive cloud-computing growth.
CEO Andy Jassy told analysts that for Amazon “there is a big opportunity in front of us” in servicing AI customers.
Shares of the Seattle-based e-commerce and tech company climbed less than 2% in extended trade after its current-quarter revenue forecast came in below expectations. The stock closed down 3.3% in the regular session.
Chief Financial Officer Brian Olsavsky told reporters on a call that capital spending would increase throughout the year, compared with $14 billion in the first quarter. “That will be the low point for the year as far as capex by quarter,” he said.
“The majority of that will be to support AWS infrastructure and in particular generative AI efforts,” he said later on a call with analysts. Amazon is investing upfront to build out its AI offerings to meet customer demand, particularly as customers seek out longer-term contracts, he said.
Amazon is racing to keep abreast of rivals in offering generative AI software. Competitors include Alphabet as well as Microsoft-backed OpenAI.
First-quarter sales increased 13% to $143.3 billion, higher than the $142.5 billion average, according to LSEG data. Net income more than tripled to $10.4 billion in the first quarter.
The company expects revenue of $144.0 billion to $149.0 billion for the current quarter ending June, compared with analyst consensus expectations of $150.07 billion, according to LSEG data.
“After a year and a half of cutting cloud costs, it appears that enterprise customers are ready to move more workflows to the cloud again, which is positive not just for Amazon, but also for many software companies that sell to enterprise customers,” said D.A. Davidson analyst Gil Luria.
Amazon Web Services (AWS), the largest provider of cloud-computing services, posted a 17% rise in revenue to $25.0 billion in the first quarter, compared with expectations of $24.53 billion.
That compares with a rise in cloud-computing revenue of 31% for Microsoft and 28% for Alphabet for the January-to-March period.
AI has been a fixation in Silicon Valley since OpenAI’s ChatGPT debuted in late 2022, fueling billions in funding and a mad dash to put chatbots and other artificially intelligent features into more products. On Tuesday, Amazon said its “Q” chatbot for businesses was publicly available and earlier this year it rolled out the Rufus service to help customers on its website find new products.
Jassy in a statement said AWS is now on pace to achieve $100 billion in annual sales.
Amazon bucked a Big Tech trend of announcing a dividend, after rivals Alphabet and Meta Platforms rolled out the investor goodie. The latter two announcements were cheered by investors who pushed the stock prices higher.
Amazon and Tesla remain the only members of the so-called Magnificent Seven tech stocks that do not offer dividends. Its shares have climbed about 15% in 2024, outperforming the S&P 500’s gain of about 6%.
Net income of $10.4 billion, or 98 cents per diluted share, compared with $3.2 billion, or 31 cents per diluted share in 2023’s first quarter. That beat analysts’ average EPS estimate of 83 cents.
Amazon’s push to build out its advertising business helped results in the quarter. The company took in $11.8 billion in ad sales, up 24% from a year earlier. The company this year added unskippable ads to its Prime Video streaming offering, which Jassy said marketers are excited about. Customers can opt out for $2.99 per month.
The company ended the quarter with 1.52 million employees, about 4,000 fewer than at year-end 2023, but higher than a year earlier by 56,000. That was despite Amazon cutting at least 27,000 jobs last year and continuing to trim positions across a number of units.
(Reporting by Yuvraj Malik in Bengaluru and Greg Bensinger in San FranciscoAdditional reporting by Noel Randewich in Oakland, CaliforniaEditing by Anil D’Silva, Kenneth Li and Matthew Lewis)
