AWS growth accelerates as Amazon misses earnings and trims outlook
Amazon reported strong growth in its cloud computing business but gave a cautious forecast for the holiday quarter after third-quarter earnings fell short of Wall Street expectations. The results left investors weighing AWS’s momentum against uncertainty over the company’s core retail business and its heavy investment in artificial intelligence.
AWS sales rose 39.3% in the quarter ending 30 September, the fastest rate in nearly five years. Amazon reported net income of $20.69bn, or $1.89 a share, and sales of $201.94bn, both below analysts’ expectations; it forecast fourth-quarter sales of $240bn to $247bn, versus expectations of $244.16bn. The company expects to spend $220bn this fiscal year, mostly on AI, and plans to hire 300,000 US seasonal workers, up from 250,000 last year.
In short
- AWS sales growth accelerated to 39.3%.
- Amazon’s third-quarter results missed analyst expectations.
- Holiday-quarter sales forecast fell short of expectations.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
AWS’s 39.3% growth suggests Amazon’s large investment in cloud computing and AI is strengthening a business with significant long-term potential. The spending and seasonal hiring could also build capacity for future demand and support the company’s competitiveness across cloud and retail.
The case against
Earnings and sales fell short of expectations, while Amazon’s holiday-quarter forecast was cautious, raising questions about whether growth in AWS can offset uncertainty in its core retail business. Spending $220bn, mostly on AI, carries substantial execution and financial risks if the returns do not justify the outlay.
Explained simply
Amazon is an online retailer and technology company, with businesses spanning shopping, delivery, advertising and cloud computing. Amazon Web Services, or AWS, sells computing power and data storage to companies and public bodies; its growth is important because cloud services are a major part of Amazon’s business.
Investors look at Amazon’s retail performance alongside AWS when judging the company’s prospects. They also track its spending on artificial intelligence, which could support future services but requires large investment, and its seasonal hiring ahead of the year-end shopping period.
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Originally published by The Guardian as “Amazon gives Wall Street mixed financial picture in earnings report”.