Amazon crushed it in e-commerce and cloud, forecast an impressive holiday quarter
Amazon’s Q3 Earnings Beat Expectations with Strong Cloud and Advertising Growth
Amazon reported impressive third-quarter earnings on Thursday, showcasing a surge in profits driven by significant growth across its core sectors. The tech giant saw an 11% increase in year-over-year revenue, totaling $158.88 billion, surpassing the anticipated $157.2 billion, according to LSEG estimates. Earnings per share rose to $1.43, well above the forecasted $1.14 and the previous year’s 94 cents.
Amazon’s operating income grew a remarkable 56% year-over-year to $17.41 billion, outpacing the consensus forecast of $14.7 billion. This substantial margin improvement was attributed to Amazon’s strategic cost controls and regionalization efforts across its North American and International businesses. Both divisions reported seven consecutive quarters of operating margin growth, affirming Amazon’s focus on cost efficiencies in its retail and logistics networks.
Amazon Web Services (AWS) and AI Drive Profitability
AWS, Amazon’s cloud business, remains a key contributor, with third-quarter revenue growth stabilizing at 19% on a constant currency basis. AWS’s operating margins expanded to around 38%, a notable 780 basis point increase year-over-year, partially driven by accounting changes and cost-efficiency measures such as hiring slowdowns and infrastructure optimization. Amazon’s AI services within AWS are also booming, with CEO Andy Jassy noting that AI revenue is now growing at a triple-digit pace.
Diversifying Revenue Streams: Advertising and Subscription Services
Amazon's high-margin advertising business saw a 19% increase in revenue, reinforcing its position as a key profit driver. Subscription services and physical stores also exceeded growth expectations, while Third-Party Seller Services reported a modest 10% increase.
Focus on Efficiency and Same-Day Delivery Expansion
CEO Andy Jassy emphasized Amazon’s commitment to reducing the cost to serve its customers. The company is doubling down on its regionalization strategy, getting products closer to customers, and investing in more same-day delivery facilities. Amazon also continues to innovate in robotics, introducing new technologies for stowing, picking, packing, and shipping, aimed at speeding up delivery times and improving safety.
Positive Fourth-Quarter Outlook
For the critical holiday quarter, Amazon forecasts net sales between $181.5 billion and $188.5 billion, reflecting an expected year-over-year increase of 7% to 11%. The projected operating income range of $16 billion to $20 billion also exceeded market expectations, reinforcing optimism among investors.
In a year marked by rising capital expenditures to support AI and fulfillment network enhancements, Amazon has demonstrated a balance between growth investments and margin improvements, which has helped the company remain resilient amid market volatility.
With a renewed focus on profitability and efficiency, Amazon’s third-quarter results solidify its position as a leader in e-commerce and cloud services, setting a positive tone as it heads into the holiday season.