The strength of consumption shown in the US macroeconomic figures was also reflected in the profit and loss statement of Amazon, the market leader in e-commerce. The Seattle-based company increased its sales in the third quarter of the year by 13% to 143,083 million dollars (around 135,500 million euros at the current exchange rate). The group grew across all business areas: online retail, physical stores, cloud computing, advertising and subscriptions. Thanks to growth in its most profitable businesses and cost containment, the company more than tripled its quarterly profit, which rose to $9,879 million from $2,872 million, according to financial statements released Thursday.
While Amazon has been able to diversify, e-commerce remains its primary source of revenue with $57,267 million in the quarter. It is this segment that has gained momentum in the heat of consumer trends, increasing its sales by 7%. Sales in physical stores rose less, by 6%, to 4,959 million.
The world’s largest digital store has also seized the opportunity to build an increasingly dynamic advertising business, which was the real engine of growth in the third quarter with an increase of 26% to 12,060 million dollars, confirming the good moment of the year digital advertising, the Google and Meta accounts already showed. Revenue from third-party services is also skyrocketing, including commissions for digital store sales and logistics and distribution of third-party products. They are the second largest source of income at 34,342 million, 20% more than a year ago.
Revenue from subscription fees (mainly Amazon Prime) also increased significantly by 14% to $10.07 billion. On the other hand, the cloud computing business (AWS) is growing below the group average, namely 12%, to 23,059 million, which is perhaps the weak point of the results. Analysts and investors are scrutinizing this business in search of the companies that will benefit most from the boom in demand for artificial intelligence computing power.
In the earnings release, Amazon CEO Andy Jassy highlights AWS’ advances in generative artificial intelligence with its Amazon Bedrock chips and code writing assistant (CodeWhisperer). The Jeff Bezos-founded company doubled down on its commitment to generative artificial intelligence last month with a strategic alliance with startup Anthropic in the race against Microsoft, Google and other giants for the new technology. Amazon will invest up to $4 billion (around €3.8 billion) in Anthropic and hold a minority stake in the company. Under the agreement, the artificial intelligence company will leverage Amazon’s microprocessors and cloud computing capabilities.
Overall, the results exceeded analysts’ expectations and the shares reacted upwards outside of normal trading hours on the stock market. In the first nine months of the year, Amazon sales rose 11% to $404,824 million. The company earned 19,801 million between January and September, compared to losses of 3,000 million in the same nine months of 2022.
“We had a strong third quarter as our cost of service and store delivery speed took another step forward, our AWS growth continued to stabilize, our advertising revenue grew solidly, and total operating income and free cash flow increased significantly,” said Andy Jassy in a statement.
According to the CEO, the benefits of restructuring its U.S. distribution network from a single common area to eight regions exceed his optimistic expectations and provide Prime customers with the fastest delivery speeds in the company’s 29-year history.
Amazon shares have risen about 40% this year as fears of a U.S. recession fade and also thanks to CEO Andy Jassy’s determination to rein in pandemic-era spending and increase benefits . The company has a market value of 1.2 billion euros, putting it behind only Apple, Microsoft and Alphabet among private companies.
The Seattle company is increasingly moving into businesses that are often more profitable than selling products online: selling ads, providing services to independent retailers and renting computing power to companies.
U.S. regulators filed a lawsuit against Amazon last month, accusing the company of engaging in monopolistic practices designed to “increase prices, degrade quality and steal innovation from consumers and businesses.”
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