Aug 3, 2023 - Economy & Business

Amazon overshoots expectations amid cost-cutting and AI optimism

Illustration of a smiley face made from the Amazon arrow.

Illustration: Shoshana Gordon/Axios

Amazon's core businesses showed signs of a rebound as corporate customers and consumers appeared less hesitant to spend in the second quarter.

Driving the news: Online store sales grew 4% from last year to nearly $53 billion, compared to flat year-over-year growth in the first quarter.

  • Amazon Web Services, the company's cloud unit, posted a 12% growth in sales, which was better than investors expected, to reach $22.1 billion in sales.
  • Overall, the company delivered its strongest quarterly profit in over a year, helped by large cost cutting efforts, and its stock jumped nearly 10% in after hours trading.

What they're saying: "To grow double digits on an $80 billion revenue run rate business [AWS], when ... every company in the world is trying to save as much money as they can [in] the last year ... means that we're acquiring a lot of new customers and a lot of new workloads," said Amazon CEO Andy Jassy on a call Thursday afternoon with analysts.

Zoom out: As for its e-commerce business, Jassy noted that the company's overhaul of its fulfillment operations and transportation networks from one national system to eight separate regional operations has helped lower costs and speed up delivery to customers.

  • Amazon's data shows that when the company makes promises of faster delivery, customers buy more often, he added.
  • At the start of this week, the company shared a slew of updates about the speed and efficiency of these new networks, including the use of newer, cheaper to operate, same-day facilities.
  • "The experience has been so positive for customers [and] our business, that we're planning to double the number of these facilities," Jassy said.

💭 Thought bubble: AI hype has driven Big Tech valuations this year and Amazon's AWS products may benefit significantly as businesses across the board chase their AI ambitions.

  • "Remember, the core of AI is data," said Jassy, who founded and led AWS before stepping into his role as CEO.
  • "AWS not only has the broadest array of storage database analytics and data management services for customers, it also has more customers in datastore than anybody else. ... We think AWS is poised to be customers' long term partner of choice in generative AI."

Of note: AI is just as much a priority for the company's own operations.

  • Jassy was careful on Thursday to also highlight the fact that "every single one" of Amazon's businesses has "multiple generative AI initiatives' to help the company become "more cost effective and streamlined."

What to watch: Amazon is optimistic for the third quarter, with a midpoint sales guidance that is several billion dollars above analyst consensus.

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