Amazon Earnings Driver Is AWS

By Douglas A. McIntyre Updated Oct 28, 6:53AM EDT · Published Oct 27, 9:25AM EDT

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The key to Amazon.com Inc. (NASDAQ: AMZN | AMZN Price Prediction) earnings will be AWS.
It has adopted AI software and has to show that this will add to Amazon’s earnings.
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Amazon.com Inc. (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 Corp.’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 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.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.