Shares jumped more than 10 per cent in after-hours trading after the company reported a strong quarter from Amazon Web Services. The cloud division, which generates most of Amazon’s profit, grew 20 per cent in the quarter, its fastest rate since 2022.
Chief executive Andy Jassy told analysts that this growth came from a much larger base than its rivals. Alphabet’s cloud business rose 40 per cent and Microsoft’s Azure climbed 34 per cent, but operate at a smaller scale. Amazon remains the world’s biggest cloud provider by revenue and still underpins much of the internet’s daily activity.
The company expects fourth-quarter sales between $206 billion and $213 billion and an operating profit of up to $26 billion. The holiday shopping season should help those numbers, supported by Amazon’s push into same-day grocery delivery and new warehouses opening in rural parts of the US.
One-time costs from legal issues and job cuts dragged on earnings for the period. In September, Amazon agreed to pay $2.5 billion to settle a Federal Trade Commission lawsuit over its Prime subscription policies. This week it announced 14,000 white-collar layoffs, which will cost around $1.8 billion but are expected to improve efficiency in the long term.
Amazon invested nearly $90 billion in capital expenditure in the first nine months of the year and expects total spending to reach $125 billion by year end. Most of that is going into AI and data centre expansion for AWS and its other technology platforms.
Jassy said demand for cloud and AI services is growing faster than Amazon can expand. “Today overall in the industry, maybe the bottleneck is power,” he told analysts. “I think at some point it might move to chips. But we’re bringing in quite a bit of capacity and as fast as we’re bringing it in right now, we’re monetising it.”
Project Rainier, one of Amazon’s largest AI data centre efforts, is now fully operational. The company has doubled its data centre capacity since 2022 and expects to double it again by 2027.
Despite trade tensions and tariffs, Amazon said sales continue to grow and sellers on its platform are largely absorbing higher import costs. Consumer spending in the US remains strong, providing a steady tailwind.
The company is investing heavily in automation, using robots and AI tools to make warehouses smaller and more efficient. The goal is to place compact fulfilment centres closer to customers and use predictive AI to anticipate purchases, reducing delivery times and logistics costs.
Jassy said the 14,000 job cuts were necessary to correct over hiring during the pandemic and to restore a “startup-like culture.” He added that Amazon would continue to invest “very significantly” in automating its distribution network.