Amazon Q3 Earnings Beat Expectations, But AWS Revenue Falls Short Amid Growing AI Competition

Amazon triples profits and exceeds sales estimates significantly for Q3, bolstered by impressive growth in advertising revenue, yet struggles to meet Wall Street's ambitions for cloud computing giant AWS, spotlighting the ongoing rivalry in the AI sector with Microsoft Azure and Google Cloud.

Amazon tripled its Q3 profit, largely due to cost-cutting measures like laying off 27,000 workers and divesting unprofitable businesses. Sales rose to $143.1 billion, up 13% from the same period last year, and advertising revenue came in above expectations at $12.1 billion.
Amazon Web Services (AWS), despite being a market leader, fell short of Wall Street's expectations by bringing in $23.1 billion in revenue, just under the estimated $23.2 billion, leading to investor concerns over slowing growth in the cloud computing sector.
Despite the slower growth, Amazon CEO Andy Jassy reassured investors that AWS had secured large contracts that would reflect positively in Q4 results. This resulted in an initial 5% increase in Amazon's stock price in after-hours trading.
Increased competition in the AI sector has put pressure on Amazon's AWS. Rival Microsoft reported that its Azure Cloud division grew by 28% in the third quarter of 2023, attributing three percentage points of that growth to its investment in artificial intelligence.
While Amazon's other businesses like retail and advertising are balancing out AWS' challenges, Wall Street's focus is on cloud performance. The competition and demand for AI capabilities are expected to escalate the race among cloud providers, posing further challenges to AWS.