Amazon (NASDAQ:AMZNMixed second-quarter results coupled with weak guidance may have spooked investors and sent shares sharply lower after-hours, but the growth potential of Amazon Web Services, or AWS, and the company’s intention to capitalize on remaining earnings Increasing market share in cloud computing should encourage investors.
“Amazon had a decent quarter, with accelerating AWS growth, market share gains in digital advertising, and improved efficiency in retail,” said Seeking Alpha investor Yuval Rotem, adding that “margins again came in higher than expected as the harvest phase shows no sign of slowing down.”
On Amazon’s (AMZN) earnings call with analysts, AWS was the main event, with CEO Andy Jassy and CFO Brian Olsavsky evaluating growth potential.
“Amazon’s unique approach to[generative AI]is resonating with customers,” Jassy said on the call, adding that “with 90% of IT spending still on-premises, there is huge potential for AWS,” as the generative AI space “gets big fast” and will be built entirely in the cloud, adding to AWS’s $105 billion annual run rate.
“For the first half of the year, investments were $30.5 billion (into AWS), but looking to the rest of 2024, we expect capital investment (capital expenditures and equipment financing) to be higher in the second half of the year, with the majority of spending going to support the necessary growth of AWS infrastructure,” Olsavsky added.
In terms of retail, Jassy and Olsavsky noted that the trend of customers cutting prices continued during the second quarter, and they expect this trend to continue in the third quarter as consumers remain cautious and vigilant in finding deals.
Amazon (AMZN) stock was ~7% decrease In after-hours trading.
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