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Amazon (Nasdaq: AMZN) recently reported its third-quarter results that did not impress the market much. While the company is seeing growth in ad and e-commerce spending, the continuing macro pressures have slowed down its cloud growth. Amazon meanwhile continues to invest in building its AI capabilities.
Amazon’s Financials
Amazon’s third-quarter revenues grew 13% to $143.1 billion, ahead of the market’s forecast of $141.5 billion. Net income of $0.94 per share blew past the Street’s forecast of $0.59 per share.During the quarter, E-commerce sales grew 7% to $57.3 billion, ahead of the analyst projected sales of $56.97 billion. Amazon collected $34.3 billion from third-party sellers, compared to analyst projections of $33.4 billion. Amazon Web Services revenue grew 12% to $23.1 billion, falling marginally short of the analyst expectations of $23.2 billion.According to Amazon, the macro-economic pressures had hurt the growth of its cloud segment. Companies were undertaking cost optimizations to lower their cloud software spending. Revenue growth for the quarter was much slower than last year’s 27.5% growth. Amazon is seeing some uptick in the current quarter and expects the pace of the deals to pick up. Ad sales remained Amazon’s fastest-growing business with revenues growing 26% to $12.1 billion. Analysts were expecting Amazon to bring in $11.6 billion from ad sales.Amazon expects its fourth-quarter revenues to be $163.5 billion, falling short of the market’s estimate of $167.1 billion.
Amazon’s AI Focus
Keeping in line with the AI fever that is hitting all tech stocks, Amazon too announced a $4 billion investment in Anthropic, an AI-focused startup. As part of the investment, Anthropic will use AWS as its primary cloud provider and Amazon’s custom chips for its AI software while Amazon will incorporate Anthropic’s models and software across its business.Earlier in the year, Amazon had announced the launch of Bedrock, a fully managed service that offers foundation models (FMs) from leading AI companies and Amazon with a single API to help simplify the development and deployment of generative AI applications.The tie-up with Anthropic will facilitate the inclusion of Anthropic’s secure model customization and fine-tuning of the service to enable enterprises to optimize AI performance. Amazon’s developers and engineers will be able to build on Anthropic’s models via Amazon Bedrock and thus incorporate generative AI capabilities into their work to enhance existing applications and create net-new customer experiences across Amazon’s businesses.Besides AI, Amazon is also expanding its e-commerce footprint into the pharmacy industry. Recently, it announced new offerings including an expanded Amazon Clinic virtual health care marketplace that is available across the US. It provides care for more than 35 conditions and ensures a timely 60-minute delivery of medications through Amazon Pharmacy using Prime Air drones in College Station, Texas. Amazon Pharmacy has also partnered with Blue Shield of California on an innovative model to provide more affordable pharmacy care to its members. Starting in 2025, Amazon Pharmacy will offer free home delivery of prescription medications to more than 4.8 million Blue Shield of California members.Meanwhile, its stock is trading at $140.60 with a market capitalization of $1.45 trillion. It touched a 52-week high of $145.86 in September. It has recovered from the 52-week low of $81.43 that it had fallen to in December last year.More By This Author:Cloud Stocks: Alphabet Bets On AI
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