Amazon’s revenue will increase as consumer and business spending improve

Amazon reported strong quarterly sales on Thursday, showing that companies and consumers are spending as inflation eases.

The company had revenue of $143.1 billion in the third quarter, a 13% year-over-year increase. It had a profit of 9.9 billion dollars. The results beat analysts’ expectations and beat Amazon’s own forecast.

But Amazon also gave a cautious outlook for the holiday quarter, saying sales growth may moderate somewhat in the final three months of the year. The fourth quarter is typically Amazon’s biggest, the period that includes Christmas shopping and the October deals event.

Investors have focused heavily on the performance of Amazon’s cloud computing business, which is critical to Amazon because it generates the majority of the company’s profits.

For nearly a year, cloud computing business growth slowed as enterprise customers cautiously budgeted in an uncertain economy. But Thursday’s results showed signs of stabilization. Sales in the cloud computing segment increased 12 percent to $23 billion. It had an operating profit of $7 billion.

Amazon CFO Brian Olsavsky said in a call with reporters and investors: “It’s a critical moment.” What business customers have done to reduce their cloud computing costs has slowed somewhat, he said, but not completely. At the same time, some of them are adding new cloud projects.

Although Amazon is the largest provider of cloud computing, it is struggling to shake off the perception that it is ahead of its rivals, notably Microsoft and Google, in the wave of generative artificial intelligence sweeping the industry. The company has introduced new AI products for enterprise customers and last month announced plans to invest up to $4 billion in AI startup Anthropic, which will compete with OpenAI, the Microsoft-backed startup that created the popular ChatGPT chatbot. he does.

A year ago, investors were worried about the health of Amazon’s retail business, which saw profits fall after overexpanding during the pandemic. Andy Jassey, the company’s chief executive, has focused on turning a profit through cost-cutting and has overseen layoffs and a sharp pullback in hiring. The company hired 1.5 million people in the most recent quarter, down 3 percent from a year earlier, though still twice as many as before the pandemic.

Consumers are still spending, Mr. Olsavsky said, although they are more deal-oriented and focus on lower-cost items.

This year, Amazon also made changes to how it fulfills customer orders, moving more inventory closer to customers to improve delivery speeds and reduce costs.

The benefits of moving from a single national fulfillment network in the United States to eight separate regions exceed our optimistic expectations, Mr. Jassi said in a statement.

Higher speeds have increased shopping frequency and lower costs have improved margins, Mr. Olsavsky said. Sales for consumer and retail offerings in North America, its most mature market, rose 11 percent to $87.9 billion, generating an operating profit of $4.3 billion.

Several of its most profitable e-commerce segments performed well, particularly its advertising. Amazon’s ad revenue growth rose 26% to $12 billion in the quarter.

Sales of services Amazon provides to third-party sellers on its marketplace grew 20 percent to $34 billion. The costs for sellers to do business on Amazon is a key issue in the long-awaited antitrust lawsuit filed by the Federal Trade Commission last month.

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