Amazon's shares experienced a significant jump following a report of better-than-expected quarterly earnings, driven by robust growth in its cloud unit, Amazon Web Services (AWS). The surge in AI demand has fuelled this growth, with AWS revenue climbing 20% in the third quarter, surpassing estimates. CEO Andy Jassy noted that AWS is re-accelerating, expanding capacity, and witnessing strong adoption of Amazon's Trainium2 chips and AI products.
Despite weaker growth in the e-commerce sector, the robust cloud demand has eased some pressure, with AWS accounting for a substantial portion of Amazon's total operating income. Amazon projects net sales of between $206 billion and $213 billion for the fourth quarter. The company is investing heavily in AI-related projects within AWS, with capital expenditures of $26.3 billion in the fourth quarter of 2024.
However, Amazon has cautioned about potential cloud service capacity constraints despite significant investments in expansion. These concerns mirror those of competitors like Microsoft, who have also experienced limitations due to data centre capacity. Amazon's challenges include hardware shipment delays and insufficient electricity, which are expected to subside in the latter half of 2025.
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