Amazon earnings key takeaways: AI, cloud growth, tariffs
Amazon CEO Andy Jassy is looking at the Amazon devices in the USA during the 26 February 2025, New York, during the launch event. Reuters/Brendan McDermid
Brendan McDermid | Reuters
Amazon On Thursday, he reported the second quarter earnings that exceeded expectations in most metric, but the results were not good enough to please the Wall Street.
The Amazon stock recorded after its publication and during the conference meeting. Stocks closed 8% on Friday. The stock has fallen about 2% to date.
While profit guidance is weaker than expected, cloud growth broke investors.
This shaded a other kind of other optimistic report, including strong income and profits, stable retail growth and an increase of 23% in advertising sales. Amazon also offered a pink income estimation for the current quarter.
Here are three important inferences from Amazon’s earnings:
AI Expenditure Increase
In the last quarter, Amazon reported that he spent 31.4 billion dollars on capital expenses, and the company expects their expenditures in the second half of the year to be “reasonable representative”. In the first quarter, Amazon’s capital expenditures exceeded $ 24 billion.
When taken together, it means that Amazon can spend 118 billion dollars on this year’s capital expenditures, 100 billion dollars. Amazon’s Capex, which reached $ 83 billion a year ago, is primarily going to create a technology infrastructure to support the demand for artificial intelligence.
Amazon’s rivals are also throwing big money to AI.
On Wednesday, Meta It increased its capital expenditures to $ 72 billion to $ 66 billion. Google parents Alphabet Last week, it increased its capital expenditure to $ 85 billion this year.
The question of investors’ minds is when these great AI bets will begin to pay in income or profit.
Amazon CEO Andy Jassy implied that the company’s progress over AI has improved “operational efficiency and business growth”, but also offers a few features.
Amazon also said that the productive AI has contributed to AWS at an equivalent annual income for “billions of dollars”.
In a conference meeting with investors, Jassy pointed to Alexa+, an upgraded version of the digital assistant, as a way to make money from AI. The service, which was initiated for early access in late March, is $ 19.99 per month or free for main members.
“Over time, I think you can imagine that we can continue to add functionality that it may be a kind of subscription beyond what is today.” He said.
Jassy reiterated that there was “very early days” in AI development and adoption.
Cloud rivals
Amazon Web Services continues to lead the cloud infrastructure market, but faces a more upright competition. Microsoft Azure and Google Cloud, who published stronger growth rates in the last three -month results.
AWS defeated Wall Street’s estimates and increased its income by 18% to year. This followed the major gains reported by Microsoft and Alphabet. Companies recorded 39% and 32% cloud growth rates, respectively.
Analysts asked the Amazon leadership in the call of why cloud business did not grow as fast as its competitors.
“There is currently a Wall Street Finance narrative, AWS is behind its productive AI with concerns about the loss of stocks to its peers.” He said. The company has an overweight degree on Amazon’s shares.
The participants pass through a conference organized by Amazon Web Services in Las Vegas on December 3, 2024, AWS RE: Invent.
Noah Berger | Getty Images
JPMorgan analyst Doug Anmuth said, “Significant cloud growth in space between the number two and number two in space.”
Jassy sometimes said the company has grown faster than competitors, the opposite, but AWS still has a “significant larger” cloud.
“I think the second player is about 65% of the AWS size,” he said.
Jassy also said that AWS customers have seen a “a big difference” in security, and recently shifted a worldwide attack on SharePoint cooperation software in Microsoft.
“You can see what’s going on in the last few months, some of these players can see adventures almost every month.” He said.
Comments could not shake some investors.
Bernstein analysts said on Friday, “the tone is not large” and Amazon’s description of competitive positioning and orbit was “less constructive than peers,” he said.
“Words are important … But the numbers are more important,” analysts wrote.
The risk of tariffs is better than feared
In May, Amazon warned that the potential uncertainty connected to the president was supported. Donald Trump’s changing tariff and trade policies.
At that time, the products imported from China were subjected to 145% upright tax. This threatened to increase the costs of Amazon sellers and millions of third -party sellers, increasing price increases and a decline concerns about consumer demand.
Since then, the US and China have reached a ceasefire and China is currently facing a 30% combined tariff ratio.
Amazon’s latest earnings showed that the company has wandered on tariffs and shifted its trade policies better than Wall Street than he was scared.
Sales in the online store filled the analyst projections and grew by 11% each year, and seller services revenue also met expectations. The number of products sold in Amazon’s online and physical stores increased by 12%, which shows that despite the tariffs and economic uncertainty of the consumer, the citizens wrote analysts to customers on Friday.
Citizens analysts show that Amazon’s third quarter sales estimation, which means 13% growth at a high level, is effectively absorbed by suppliers, traders and customers. ” They get a better note on the company’s shares.
Jassy, especially when it comes to China, said a positive but cautious tone in the call, saying that it is difficult to know where the tariffs will be settled.
“At this point, we are not sure who will absorb this higher costs.” He said.
An agreement between the United States and China was not completed, and until August 12, the two countries reach a final agreement.
Until now, Amazon has been able to ventilate Trump’s trade war.
“We did not see in demand and did not see any large scale [average selling price] It is increasing, “Jassy call.” There are many things we don’t know, but that’s what we’ve ever seen. “
