Amazon Shares Surge 11% as AI Boom Drives Cloud Growth

Key Takeaways

• Amazon shares surged 11% after hours following strong Q3 earnings
• AWS revenue jumped 20% to $33 billion, fastest growth since 2022
• Company forecasts Q4 sales of $206-213 billion, up 10-13%
• Amazon added 3.8 gigawatts of power capacity for AI infrastructure

Amazon’s stock price skyrocketed more than 10% on Thursday as the e-commerce giant reported better-than-expected earnings, driven by surging demand for its cloud computing services and artificial intelligence capabilities.

Strong Financial Performance

Quarterly sales rose 13% to $180.2 billion across the company, while net income climbed to $21.2 billion from $15.3 billion a year earlier. The company forecast fourth-quarter sales of $206-213 billion, representing growth of 10-13%.

AWS Growth Accelerates

Amazon Web Services, which recently suffered a global outage, saw revenues jump 20% to $33 billion in the third quarter – marking its fastest growth rate since 2022 as companies race to build AI capabilities.

“The significant acceleration of AWS growth should help dispel some of the concerns that Amazon has been failing to keep up with (Microsoft) Azure and Google Cloud,” said Emarketer principal analyst Sky Canaves.

Massive AI Investments

While Amazon didn’t break out specific AI investment figures, the company increased year-on-year purchases of property and equipment by $50.9 billion – a massive jump in spending.

Amazon also added 3.8 gigawatts of power capacity over the past year to support AI infrastructure, more than any other cloud provider, and launched a massive computing cluster with nearly 500,000 custom AI chips.

“In our view, Amazon is right to make these investments as they will help provide the company with new avenues for growth and ensure it remains competitively sharp,” said Neil Saunders, Managing Director of GlobalData.

Costs and Workforce Changes

Operating income remained flat at $17.4 billion after Amazon took two major charges: $2.5 billion for a legal settlement with the Federal Trade Commission and $1.8 billion in severance costs tied to planned job cuts.

The company is reducing its workforce by 14,000 positions to streamline operations as it invests in artificial intelligence. The cuts are expected to target areas such as human resources, advertising, and management.

The FTC settlement resolved allegations that Amazon used deceptive practices to enroll consumers in Amazon Prime and made it difficult to cancel subscriptions. The company admitted no wrongdoing but paid $1.5 billion into a consumer fund for refunds and $1 billion in civil penalties.