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Amazon shares soared over 13% in after-hours trading Thursday following a robust third-quarter earnings report that handily beat analyst expectations. The e-commerce and cloud computing giant also demonstrated significant growth within its key Amazon Web Services (AWS) division, further fueling investor optimism.
Here’s a detailed breakdown of Amazon’s performance compared to LSEG consensus estimates:
Beyond the headline figures, Wall Street closely scrutinized these crucial revenue streams:
- Amazon Web Services: $33 billion vs. $32.42 billion expected (StreetAccount)
- Advertising: $17.7 billion vs. $17.34 billion expected (StreetAccount)
The performance of AWS was particularly noteworthy. Revenue within Amazon’s cloud division accelerated to 20.2% growth during the quarter, exceeding analyst projections of 18.1%. This acceleration addresses previous concerns regarding AWS’s growth trajectory amid intensifying competition from Google Cloud and Microsoft Azure.
For context, Google Cloud reported a 34% revenue increase in its third quarter, while Microsoft Azure showcased a robust 40% growth rate. The cloud infrastructure landscape is becoming increasingly competitive, demanding continuous innovation and strategic partnerships.
Amazon CEO Andy Jassy emphasized AWS’s resurgence, stating it’s “growing at a pace we haven’t seen since 2022” and highlighted the burgeoning demand for artificial intelligence infrastructure.
“We continue to see strong demand in AI and core infrastructure, and we’ve been focused on accelerating capacity — adding more than 3.8 gigawatts in the past 12 months,” Jassy added, signaling a substantial investment in catering to the power-hungry requirements of AI workloads. This proactive expansion demonstrates Amazon’s commitment to maintaining its leading position in the cloud market.
While Amazon remains the dominant provider of cloud infrastructure, concerns have lingered regarding the company potentially missing out on lucrative AI deals. This sentiment has somewhat dampened Amazon’s stock performance, which is up roughly 1.6% year-to-date, lagging behind other members of the “Magnificent Seven.”
However, Amazon is taking decisive steps to solidify its position in the AI space. The recent inauguration of Project Rainier, an $11 billion AI data center dedicated to running models from Anthropic’s Claude chatbot, underscores this commitment. This dedicated infrastructure will provide a significant competitive advantage in supporting cutting-edge AI development.
Further emphasizing its focus on future growth, Amazon raised its capital expenditure forecast for the year to $125 billion, up from the previous estimate of $118 billion. CFO Brian Olsavsky indicated that this figure is likely to increase further in 2026, demonstrating a long-term commitment to investing in infrastructure and innovation.
Looking ahead to the current quarter, Amazon projects sales to fall within the range of $206 billion to $213 billion. The midpoint of this guidance, $209.5 billion, surpasses analyst estimates of $208 billion (LSEG). Operating income is projected to be between $21 billion and $26 billion, against analysts’ expectations of $23.8 billion.
Amazon’s strategic investments in AI permeate across its diverse business segments, including retail, cloud services, devices, and advertising. The company is strategically positioning itself to capitalize on the expanding interest in generative AI, particularly following the emergence of OpenAI’s ChatGPT.
Simultaneously, Amazon is actively pursuing cost optimization measures in other areas. Recently, the company announced plans to lay off 14,000 corporate employees as part of an initiative to streamline operations and enhance organizational agility.
Addressing the layoffs in a conference call, CEO Jassy clarified that the announcement was not primarily “financially driven” or directly attributable to the rise of AI, “at least, right now.”
“It really it’s culture,” Jassy stated. “If you grow, as fast as we did for several years, you know, the size of the businesses, the number of people, the number of locations, the types of businesses you’re in, you end up with a lot more people than what you had before, and you end up with a lot more layers.” This signals a focus on improving operational efficiency and adapting to a post-pandemic growth environment.
Following a period of rapid hiring during the pandemic, Amazon has been selectively reducing its workforce to align with evolving business needs. The company concluded the quarter with approximately 1.58 million employees, representing a 2% increase year-over-year.
Operating income remained relatively flat year-over-year at $17.4 billion, reflecting the impact of both a $2.5 billion settlement with the Federal Trade Commission concerning “deceptive” Prime signups and approximately $1.8 billion in severance costs associated with planned role eliminations.
Amazon year-to-date stock chart.
Amazon has also introduced several AI-powered tools and services, including Q, a chatbot designed for business users; Bedrock, a generative AI service for cloud customers; and Rufus, an AI shopping assistant launched earlier in the year.
The company reported that 250 million shoppers have engaged with Rufus this year, with 60% of users indicating they were “more likely to complete a purchase” after interacting with the chatbot. This highlights the potential for AI to enhance the customer experience and drive sales growth.
Core online stores unit posted solid growth of 10% for the quarter, fueled in part by the Prime day Discount Event, conducted in July.
President Trump’s shifting trade policies pose an uncertainty for Amazon. However, as Jassy told investors last quarter, the current tariff increases have not dented consumer demand and don’t allow for significant price increases.
Finally, Amazon Cited tariffs and trade policy as variables that could cause their guidance to change.
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