Amazon’s cloud growth and AI momentum fuel bright outlook

• Amazon’s strong cloud results ease pressure from softer e-commerce growth and global trade uncertainty.

Amazon delivered its fastest cloud revenue growth in nearly three years in the third quarter, sparking a 14 per cent surge in after-hours share price and adding roughly $330 billion to its market value.

The online retail and tech giant pointed to relentless enterprise demand for artificial intelligence (AI) solutions as a key driver and projected fourth-quarter sales above Wall Street estimates.
The company’s Amazon Web Services (AWS) division—responsible for more than half of Amazon’s operating income—reported a 20 per cent bump in revenue for the quarter ending September, handily outpacing analyst expectations of 18 per cent.

CEO Andy Jassy credited AWS’s “pace we haven’t seen since 2022,” enabled by growth in both AI and core cloud infrastructure. He flagged a coming increase in capital spending, driven largely by AI, with CFO Brian Olsavsky projecting CapEx to exceed this year’s estimated $125 billion.

Amazon’s strong cloud results eased pressure from softer e-commerce growth and global trade uncertainty, as the company braces for the holiday shopping season amid flagging consumer confidence. The tech giant projected Q4 sales of $206–$213 billion, above consensus forecasts.

AI arms race heats up

Amazon’s rally follows a week of strong cloud results from Microsoft and Google, both of which are also pouring record sums into data centers, chips, and AI research. Meta and Alphabet likewise signaled ongoing AI-fueled investment, with Federal Reserve Chair Jerome Powell noting that today’s AI boom, unlike the dot-com bubble, is driven by profitable, established businesses.

The Seattle-based company’s AI efforts have sometimes been criticised as lagging behind, but recent momentum, particularly at AWS, is helping close that gap. Jassy was upbeat with analysts: “I look at the momentum we have right now, and I believe that we can continue to grow and click like this for a while…in advertising and retail sales as well.”

Amazon’s advertising business remained a bright spot, growing 24 per cent YoY to $17.7 billion, as the company expands sponsored listings and explores new ad spaces such as the Echo Show and smart grocery carts.

However, the company also recorded a $1.8 billion charge related to severance, having cut 14,000 corporate jobs this quarter as part of a broader restructuring. Jassy framed the headcount reduction as a “culture” shift, aiming to reduce layers created during Amazon’s rapid expansion.

Results were further weighed down by a one-time $25 billion charge over a settlement with the Federal Trade Commission regarding Prime membership practices.

Looking forward

Despite workforce reductions and regulatory costs, Amazon’s focus on cloud, AI, and advertising is positioning it for continued growth.

With AWS accounting for around 60 per cent of total operating income on just over 15 per cent of total revenue, the unit’s performance remains central to Amazon’s valuation story as the company eyes further gains in the pivotal holiday quarter.