Amazon.com (NASDAQ: AMZN) has been and still is the largest e-commerce company in America for decades. It undercut prices and the delivery services of physical retailers so much that it was blamed for losses in the brick-and-mortar industry. No one would have guessed that Amazon Web Services, now known as AWS, would transform the massive online retailer and that e-commerce would take a back seat to cloud computing. But that is what has happened.
AWS is the largest cloud computing company in America based on revenue. The sector has become a horse race recently driven by which players can adopt artificial intelligence to draw customers and market share. Amazon investors have been concerned that Microsoft’s (NASDAQ: MSFT) relationship with AI leader OpenAI would give it an early lead. However, it is far too early to tell. AWS CEO Matt Garman recently told The Wall Street Journal that his company had been more “deliberate” as it rolled out AI features and was not trailing Microsoft’s services.
Amazon’s upcoming earnings will show whether its approach is correct. When Amazon announced earnings for the second quarter, CEO Andy Jassy offered several descriptions of why AWS was the best AI-based solution for most cloud customers.
Upcoming earnings will be an early proof of whether Jassy is right. In the second quarter, AWS had revenue of $26.3 billion, 18% of Amazon’s total. However, its operating income was $9.3 billion compared with Amazon’s $14.5 billion total, which made it 64% of the bottom line. AWS revenue growth was 19% from the same period in 2023. Presumably, if AI features have drawn customers recently, the growth rate will rise substantially.
When Amazon posts third-quarter earnings, its original e-commerce business will not matter much if AWS does not post home run numbers.
Take This Retirement Quiz To Get Matched With An Advisor Now (Sponsored)
Are you ready for retirement? Planning for retirement can be overwhelming, that’s why it could be a good idea to speak to a fiduciary financial advisor about your goals today.
Start by taking this retirement quiz right here from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes. Smart Asset is now matching over 50,000 people a month.
Click here now to get started.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
