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Amazon.com beat fourth-quarter revenue expectations as new generative artificial intelligence (AI) capabilities in its cloud and e-commerce businesses spurred strong growth over the holiday period. Amazon shares rose as much as eight percent in after-hours trading, boosted by the rally following quarterly results.
Amazon’s list of high-spending enterprise customers has given it stable growth in an uncertain economy, but its position as the world’s largest cloud provider is being challenged by rival Microsoft, according to Reuters.
Amazon Web Services (AWS) CEO Andy Jassy in a statement touted the unit’s “continued long-term focus on customers and feature delivery,” citing efforts to incorporate generative AI into many of its services. The new features “are starting to be reflected in our overall results,” he said.
Also read: Amazon launches Rufus, an AI-powered shopping assistant – check out the details
Later, on a call with analysts, he said the revenue generated by AI was still relatively small and that he expected the technology to generate tens of billions of dollars in revenue over the next few years. He said virtually every consumer company Amazon operated already had or would have generative AI offerings.
AWS’s operating margin in the fourth quarter rose to nearly 30 percent, according to Visible Alpha, just shy of third-quarter earnings. AWS reported revenue of $24.2 billion, largely in line with analyst expectations. To bolster its cloud business and in response to Microsoft’s promised $10 billion investment in ChatGPT parent OpenAI, Amazon is spending up to $4 billion on chatbot maker Anthropic.
Amazon expects its capital spending this year to increase to support AWS growth, including additional investments in generative artificial intelligence and large language models, Chief Financial Officer Brian Olsavsky said on the conference call.
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Earlier this week, Microsoft and Alphabet reported generous cloud revenue gains in the December quarter, as customers queued up to try new AI features and create their own AI services. However, the rising costs of developing these cutting-edge features irritated investors expecting a big boost in sales from the new technology, sending its shares tumbling.
Amazon Stock After Q4 Prints
Amazon shares are up more than six percent this year and 41 percent in the past 12 months. The stock, which is up 81 percent in 2023, helped lift the S&P 500 by nearly a quarter last year along with other tech giants.
Despite the strong performance, Amazon began the year by eliminating jobs in several divisions. Last year, it cut more than 27,000 jobs after hiring heavily during the pandemic, like other tech rivals.
“We’re coming out of a period where we’ve done a lot of hiring,” Amazon Chief Financial Officer Brian Olsavsky told reporters in a call. “There is a general feeling in most teams that we are trying to maintain the roster.”
Amazon’s advertising revenue rose 27 percent to $14.65 billion in the fourth quarter, largely in line with estimates. Amazon’s fourth-quarter sales rose 14 percent to $170 billion, beating analysts’ average estimate of $166.21 billion, according to Reuters. Adjusted earnings of $1 per share beat an average estimate of 80 cents per share. The company forecast revenue for the current quarter of between $138 billion and $143.5 billion.
Amazon has built fulfillment centers closer to customers, making package delivery cheaper and faster. During last year’s major Black Friday and Cyber Monday holiday shopping events, customers around the world purchased more than 1 billion items on Amazon. The company also launched Buy With Prime, a service that allows Prime subscribers to get one- and two-day shipping from merchants who may not be on Amazon.com, according to the Reuters news agency.
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