Amazon.com has announced record-breaking first-quarter sales, driven by the AI boom propelling growth in its cloud-computing unit. This performance signals a strong recovery from the pandemic-induced slowdown experienced last year.
Revenue surged by 13% to reach an all-time high of $143.3 billion in the January-to-March period, with profits soaring to $10.4 billion, surpassing Wall Street's expectations. Amazon CEO Andy Jassy has significantly redirected the company's focus towards AI innovations after lagging behind competitors like Microsoft and Google in this space. In his recent annual letter to shareholders, Jassy outlined how generative AI could become a key growth pillar for Amazon, alongside its existing online retail Marketplace, Amazon Prime, and cloud-computing unit, Amazon Web Services.
Sales in Amazon Web Services (AWS), a crucial profit center, grew by over 17% to about $25 billion in the first quarter. The division's operating profit also surged by nearly 84%. Jassy attributes this growth to AWS's AI capabilities, which are reaccelerating the business's growth rate, bringing it to an annual revenue of $100 billion.
Following these results, Amazon's stock rose by 2% after hours and has seen a 15% increase so far this year. For the second quarter, Amazon projected sales of $144 billion to $149 billion, slightly below analysts' expectations of $150.2 billion.
The strong demand for Amazon's cloud services reflects a healthy uptick, according to Daniel Morgan, senior analyst and portfolio manager at Synovus Trust. He notes a reinvigorated growth in the data center, putting Amazon on par with Alphabet and Microsoft.
AWS sales had slowed down last year due to lower enterprise demand, but Amazon expects growth to pick up again as businesses respond positively to its latest cloud offerings.
Investors are closely monitoring AI spending levels at major tech companies, penalizing those with unclear paths to profitability. Google, Microsoft, and Meta Platforms have all forecast significant increases in capital spending to support their AI investments.
Amazon has also been making strategic investments in AI, such as its stake in AI startup Anthropic and the introduction of an AI chatbot called Amazon Q, now generally available through AWS. Additionally, the company launched an AI-powered shopping assistant named Rufus on its mobile app to enhance the shopping experience.
Despite these successes, Amazon faces challenges, including increased competition in e-commerce and an antitrust lawsuit from the Federal Trade Commission. The company is also dealing with regulatory challenges, including safety regulations for goods sold through its platform.
Amazon's efforts to boost profits include streamlining its operations, such as the recent layoffs and leadership changes. CEO Andy Jassy is focused on strengthening the company's supply chain and improving delivery times and costs by optimizing warehouse locations.