Amazon's shares jumped sharply, reaching a record high, following its third-quarter earnings report which significantly surpassed analyst expectations. The company reported earnings per share (EPS) of $1.95 and revenue of $180.2 billion, handily beating estimates of $1.57 EPS and $177.8 billion in revenue. This strong performance was primarily attributed to the impressive growth of its cloud computing unit, Amazon Web Services (AWS), and its digital advertising segment.
AWS revenue climbed 20% year-over-year to $33 billion, exceeding expectations and contributing $11.4 billion to operating income, amounting to roughly two-thirds of Amazon's total operating profit. The company also highlighted the success of its Trainium2 AI chip, which has become a multi-billion dollar business, growing 150% quarter-over-quarter. Amazon further announced the launch of its Project Rainier AI cluster, featuring 500,000 Trainium 2 chips, underlining its commitment to AI investments. Additionally, the digital advertising business saw a 24% increase in revenue, reaching $17.7 billion.
In response to strong demand for artificial intelligence services, Amazon raised its capital expenditure forecast for 2025 to $125 billion, up from an earlier estimate of $118 billion. CFO Brian Olsavsky indicated that this figure is likely to increase further in 2026. This increased spending on AI infrastructure suggests Amazon's strategic focus on maintaining its competitive edge in the cloud and AI sectors. The company also provided an optimistic outlook for the current quarter, forecasting sales between $206 billion and $213 billion, with the midpoint of $209.5 billion exceeding analyst estimates of $208 billion. Analysts from Pivotal Research praised Amazon's "deep moat" and numerous healthy organic growth opportunities.
While Amazon's cloud growth of 20% was strong, it still lagged behind competitors like Microsoft Azure (40% growth) and Google Cloud (34% growth) in the previous quarters, which had raised some investor concerns. However, the overall robust performance and future outlook assuaged these worries. Despite the positive financial results, the company continues with workforce reductions, though CEO Andy Jassy stated these are not primarily financially driven or due to AI at this time. Amazon ended the quarter with approximately 1.58 million employees, a 2% increase from the prior year.
