Amazon outperformed expectations in Q3 2024, with earnings reaching $1.43 per share, compared to the forecast of $1.14, and revenue climbing to $158.88 billion, above LSEG analysts’ expectations of $157.2 billion. Key growth drivers were the Amazon Web Services (AWS) cloud division and the advertising business, both outpacing the e-commerce segment. Additionally, Amazon increased its investments in infrastructure and equipment to support artificial intelligence (AI) projects, reinforcing its commitment to long-term technological growth.
AWS generated $27.4 billion in revenue, slightly below StreetAccount’s estimate of $27.5 billion. Nonetheless, AWS demonstrated significant improvement, achieving a 19% growth rate for the quarter, compared to 12% the previous year. In 2023, AWS experienced slowed growth as customers reduced spending amidst economic uncertainty; however, this year, AWS has stabilized and strengthened its market position. Despite its improvement, AWS’s growth rate lags behind competitors like Microsoft Azure and Google Cloud, which reported revenue increases of 33% and 35%, respectively.
Increased Capital Investments in AI and Infrastructure
Amazon’s capital expenditures saw a substantial increase, rising by 81% year-on-year in Q3 from $12.48 billion to $22.62 billion. This increase is largely due to data center expansion and the acquisition of Nvidia graphics processing units (GPUs) for AI development. CFO Brian Olsavsky noted that a significant share of Amazon’s 2024 budget would support infrastructure advancements essential for AI projects. CEO Andy Jassy stated that Amazon plans to invest about $75 billion in capital expenditures this year, with a likely increase in 2025, underscoring that these investments represent “a unique, perhaps once-in-a-lifetime opportunity.” Amazon is confident that shareholders will recognize the value of these long-term investments, which are central to the company’s strategy.
Amazon’s advertising division also demonstrated notable growth, reaching $14.3 billion in Q3—up 19% from the previous year. This segment’s performance outpaced Amazon’s retail sector, highlighting the increasing importance of advertising to Amazon’s revenue diversification efforts.
Competitive Context and Q4 Outlook
Amazon closed out the corporate earnings season for major tech firms, with Alphabet, Microsoft, and Meta previously reporting. Alphabet’s revenue benefited from cloud services, while Microsoft saw a decline in share value amid increased infrastructure costs. Meta exceeded forecasts, though it warned of heightened infrastructure costs next year. Among these giants, Amazon exhibited the highest revenue growth, with its advertising growth of 19% surpassing Meta’s 18.7% and Google’s 15%. Despite Amazon’s advertising segment being smaller than Meta’s or Google’s, its growth stands out, notes NIX Solutions.
Looking ahead, Amazon forecasts Q4 revenue between $181.5 billion and $188.5 billion, translating to a 7-11% growth over the prior year. The midpoint forecast of $185 billion falls slightly short of LSEG analysts’ $186.2 billion estimate. Amazon’s Q3 operating profit also rose 56% to $17.4 billion, reflecting effective cost-cutting measures and increased efficiency. Since early 2022, Amazon has eliminated over 27,000 jobs as part of ongoing streamlining efforts.
We’ll keep you updated as Amazon continues to pursue strategic investments aimed at long-term growth.