Operating income for the upcoming quarter is estimated to be between $15.5 billion and $20.5 billion, below the average forecast of $19.4 billion. Revenue is expected to range from $174 billion to $179.5 billion, as announced by the company in a recent statement, exceeding analysts’ average expectation of $173.2 billion.
CEO Andy Jassy is in a fierce AI infrastructure competition with Microsoft and Alphabet, necessitating significant investments in data centers. Both competitors have previously reported strong earnings, indicating their gains from the AI surge.
Amazon’s capital expenditures reached a record $31.4 billion in the quarter, marking a nearly 90% increase from the same period last year. CFO Brian Olsavsky mentioned that this spending level is indicative of the company’s plans for the latter half of the year.
In the second quarter, revenue surged by 13% to $167.7 billion, surpassing expectations. However, Amazon Web Services, the top provider of leased computing power, only saw a slight increase of over 17% to $30.9 billion, slightly above the analysts’ average estimate of $30.8 billion.
The growth in AWS sales was deemed “very disappointing” compared to the higher rates reported by Microsoft and Google. Microsoft’s Azure recorded a 39% sales increase in the quarter ending in June, while Google Cloud revenue grew by 32%.
During the earnings call, analysts questioned Jassy about why AWS was not keeping pace with competitors despite the robust demand for AI workloads.
Jassy emphasized that it is still early days in the realm of artificial intelligence. He noted that Amazon’s ongoing efforts to reduce the costs of AI applications would attract more customers over time. Jassy reiterated that building sufficient capacity to meet customer demands will take time, with the availability of electricity for data centers being a major limitation to expanding cloud services.
Regarding security and availability, Jassy highlighted the advantages offered by AWS compared to other providers. He pointed out recent cybersecurity incidents affecting Microsoft, underscoring the distinct security outcomes in AWS.
Despite an initial decline in Amazon’s stock price following the earnings report, Jassy’s comments during the call further dampened investor sentiment. The stock plummeted by 6.9% to $217.89 as the New York markets opened on Friday, marking the most significant intraday drop in almost four months.
Analyst Sky Canaves cautioned about the wide range in Amazon’s operating income guidance for Q3, signaling potential uncertainties stemming from trade negotiations and escalating competition in the AI sector, similar to the challenges faced in Q2.
The second-quarter operating profit stood at $19.2 billion, surpassing the average estimate of $17 billion. Total operating expenses for the quarter rose by 11% to $148.5 billion, with the employee count increasing by 1% from the previous year to over 1.54 million.
