Amazon CEO Andy Jassy Assures Investors Expensive A.I. Infrastructure Is Worth It
Amazon kicked off the holiday season with steady growth as Amazon Web Services, its cloud division, continues to boom amid the A.I. craze. During the July-September quarter, AWS generated $27.5 billion in revenue, up 19 percent from a year ago, and projects to generate $110 billion in revenue for the full year. AWS’s profits grew 48.6 percent to $10.4 billion, making up the majority of Amazon’s total operating income following North American retail sales. Amazon’s total revenue jumped 11 percent to $158.9 billion, exceeding Wall Street’s estimates.
“The AWS team continues to make rapid progress in delivering A.I. capabilities for customers and building a substantial A.I. business,” Amazon CEO Andy Jassy said on an earnings call yesterday (Oct. 31).
AWS’s revenue boost was driven, in part, by the cloud provider’s latest agreements with several major companies, including Capital One, Sony, T–Mobile, and Toyota as customers seek additional compute power to run their power-intensive A.I. workloads. AWS customers now have access to the latest foundation models in Amazon’s generative A.I. platform Bedrock, including Claude 3.5 Sonnet and Meta’s Llama 3.2. Customers also have access to custom silicon chips like the Graviton and Trainium through the cloud.
In addition to updated A.I. capabilities for enterprises, Amazon launched a slate of new generative A.I. tools for consumers. In October, Amazon launched a new line of Kindle e-book readers with an A.I.-powered notebook app that can summarize pages of books in bullet points, as well as A.I. Shopping Guides, a tool online shoppers can use on Amazon’s website to find the right products. A month prior, the tech giant launched Project Amelia, an A.I.-assistant sellers can use to answer questions about their inventory, sales and customer traffic.
“In the last 18 months, AWS has released nearly twice as many machine learning and genAI features as the other leading cloud providers combined,” Jassy said.
Still, investors questioned when AWS will see a return on investment. Amazon spent $69.75 billion on property and equipment, a 27 percent jump from the $54.73 billion it spent over the same period last year. Amazon projects to spend a total of $75 billion in capital by the end of 2024, the majority of which will go to AWS’s A.I. infrastructure like chips and data centers, and expects to spend even more in 2025, according to Jassy.
The CEO assured investors that AWS is expanding at a “very rapid rate” and must continue to invest in A.I. hardware to meet growing customer demand. Heavy investments in infrastructure like data centers, he adds, are “useful assets” that will operate for 20 to 30 years.
“I think we’ve proven over time that we can drive enough operating income and free cash flow to make this a very successful return on invested capital business,” Jassy said in response to questions around Amazon’s heavy spending. “We expect the same thing will happen here with generative A.I.”
It’s not just Amazon’s cloud unit seeing growth. Sales from Amazon.com grew 7 percent to $61.41 billion, and sales increased 8 percent across its physical stores. Amazon’s advertising services, too, jumped 19 percent to $14.3 billion following the release of ads on its streaming service Prime Video.
Looking ahead, Amazon will continue to expand its A.I. offerings. Jassy teased new robotics capabilities to automate shipping and packaging across its fulfillment centers and hinted at generative A.I. capabilities coming to its A.I.-home assistant Alexa.
“I think that the next generation of these assistants and the generative A.I. applications will be better at not just answering questions and summarizing, indexing and aggregating data, but also taking actions,” Jassy said.