Amazon: Doubles Q2 Net Income

Amazon shares slipped Thursday after it projected weaker-than-expected revenue growth and said it would continue to ratchet up spending to meet anticipated demand for artificial-intelligence services.

The company’s total sales rose 10% from a year earlier to $148 billion during the three-month period ending in June. Its profit was $13.5 billion. Its sales were in line with analyst expectations, while its profit was higher than predicted.

Revenue from Amazon’s cloud computing unit, Amazon Web Services, grew by about 19% to a higher-than-expected $26.28 billion. The business has shown renewed strength after experiencing a slowdown in 2023.

Like many of the top companies in technology, Amazon has been ramping up its spending on the data centers, real estate and chips needed to meet the surging demand for computer power that has come with the rise of artificial intelligence. Amazon’s purchases of property and equipment, a measurement of its capital spending, was $17.62 billion in the second quarter. That is more than 50% higher than the year-earlier level and the highest quarterly spending since 2021.

Brian Olsavsky

Chief Financial Officer Brian Olsavsky said the company’s strong capital spending will continue in the near term.

Amazon has sought to ignite faster growth in the cloud business, which is the leading cloud provider and the company’s profit center. The unit slowed down last year as corporate customers looked to curtail their spending, and Amazon faced renewed competition from Microsoft, which has been attracting customers through its budding AI business.

Amazon has been promoting its own AI capabilities, adding new services for AWS customers. The company has said AI offerings such as its Bedrock applications builder have been well received by customers.

Andy Jazzy

Amazon Chief Executive Andy Jassy wants to make the company a leader in artificial intelligence. It has created special teams to tackle AI innovation and large language models, and Amazon has released a flurry of services, including an AI shopping assistant on its app named Rufus.

The company said it expects its sales to be between $154.0 billion and $158.5 billion during the current quarter, a range falling on the low end of Wall Street estimates. The company projected it would record an operating income between $11.5 billion and $15 billion this quarter

Amazon has benefited from an overall healthy e-commerce market as consumers have continued to spend strongly while looking for deals. The company said in July that its annual Prime Day saw record-breaking sales, though it didn’t share details. Adobe Analytics, which analyzes Prime Day impact, said online spending in the U.S. rose 11% to $14.2 billion during the two-day event. Prime Day’s performance won’t be reflected until the company’s next earnings report.

Amazon’s advertising business, which has grown quickly for the company, rose by 20% in the second quarter to $12.77 billion, lower than what analysts had expected.