Amazon's AI-Driven Growth: AWS Surges Amid Heavy Investment in Generative AI Infrastructure

Amazon CEO Andy Jassy Assures Investors Expensive A.I. Infrastructure Is Worth It

Heavy investments in A.I. infrastructure like data centers are "useful assets" that will operate for 20 to 30 years, CEO Andy Jassy said. Amazon (AMZN) kicked off the holiday season with steady growth as Amazon Web Services, its cloud division, continues to boom amid the A.I. craze. During the July-September quarter, AWS generated $27.5 billion in revenue, up 19 percent from a year ago, and projects to generate $110 billion in revenue for the full year. AWS's profits grew 48.6 percent to $10.4 billion, making up the majority of Amazon's total operating income following North American retail sales. Amazon's total revenue jumped 11 percent to $158.9 billion, exceeding Wall Street's estimates. Sign Up For Our Daily Newsletter Sign Up Thank you for signing up! By clicking submit, you agree to our <a href="http://observermedia.com/terms">terms of service</a> and acknowledge we may use your information to send you emails, product samples, and promotions on this website and other properties. You can opt out anytime. See all of our newsletters "The AWS team continues to make rapid progress in delivering A.I. capabilities for customers and building a substantial A.I. business," Amazon CEO Andy Jassy said on an earnings call yesterday (Oct. 31). AWS's revenue boost was driven, in part, by the cloud provider's latest agreements with several major companies, including Capital One, Sony, T-Mobile, and Toyota as customers seek additional compute power to run their power-intensive A.I. workloads. AWS customers now have access to the latest foundation models in Amazon's generative A.I. platform Bedrock, including Claude 3.5 Sonnet and Meta's Llama 3.2. Customers also have access to custom silicon chips like the Graviton and Trainium through the cloud. In addition to updated A.I. capabilities for enterprises, Amazon launched a slate of new generative A.I. tools for consumers. In October, Amazon launched a new line of Kindle e-book readers with an A.I.-powered notebook app that can summarize pages of books in bullet points, as well as A.I. Shopping Guides, a tool online shoppers can use on Amazon's website to find the right products. A month prior, the tech giant launched Project Amelia, an A.I.-assistant sellers can use to answer questions about their inventory, sales and customer traffic. "In the last 18 months, AWS has released nearly twice as many machine learning and genAI features as the other leading cloud providers combined," Jassy said. Still, investors questioned when AWS will see a return on investment. Amazon spent $69.75 billion on property and equipment, a 27 percent jump from the $54.73 billion it spent over the same period last year. Amazon projects to spend a total of $75 billion in capital by the end of 2024, the majority of which will go to AWS's A.I. infrastructure like chips and data centers, and expects to spend even more in 2025, according to Jassy. The CEO assured investors that AWS is expanding at a "very rapid rate" and must continue to invest in A.I. hardware to meet growing customer demand. Heavy investments in infrastructure like data centers, he adds, are "useful assets" that will operate for 20 to 30 years. "I think we've proven over time that we can drive enough operating income and free cash flow to make this a very successful return on invested capital business," Jassy said in response to questions around Amazon's heavy spending. "We expect the same thing will happen here with generative A.I." It's not just Amazon's cloud unit seeing growth. Sales from Amazon.com grew 7 percent to $61.41 billion, and sales increased 8 percent across its physical stores. Amazon's advertising services, too, jumped 19 percent to $14.3 billion following the release of ads on its streaming service Prime Video. Looking ahead, Amazon will continue to expand its A.I. offerings. Jassy teased new robotics capabilities to automate shipping and packaging across its fulfillment centers and hinted at generative A.I. capabilities coming to its A.I.-home assistant Alexa. "I think that the next generation of these assistants and the generative A.I. applications will be better at not just answering questions and summarizing, indexing and aggregating data, but also taking actions," Jassy said.

Amazon Q3 2024 Earnings: CEO Jassy Says AI 'Once In A Lifetime' Opportunity

'Our customers, the business and our shareholders will feel good about this long term,' Amazon CEO Andy Jassy says. Amazon CEO Andy Jassy said on the company's latest quarterly earnings call that the vendor expects to spend more than $75 billion on capital in 2025, most of that going toward Amazon Web Services and generative artificial intelligence. The Seattle-based cloud giant has spent $51.9 billion in capital expenditures year to date and expects about $75 billion spent in 2024, focusing on infrastructure, AWS and GenAI. But the CEO noted the long life cycle for this infrastructure-he estimated 20 to 30 years of life for data centers-and said to trust in Amazon's history of spending responsibly. "We've proven over time that we can drive enough operating income and free cash flow to make this a very successful return on invested capital business, and we expect the same thing will happen here with generative AI," he said. "It is a really unusually large, maybe once in a lifetime, type of opportunity. And I think our customers, the business and our shareholders will feel good about this long term that we're aggressively pursuing it." [RELATED: Presidio Signs 'Huge' AWS Agreement To Drive GenAI, Sales And Innovation] Jassy shared his views on his company's spending and the AI opportunity during Amazon's Thursday call reporting results for its third fiscal quarter, ended Sept. 30. During the call, Jassy highlighted AWS' "deepest partner community" as a competitive differentiator, along with broad functionality and strong security. He also detailed the vendor's continued investment in custom chips to help meet AI demand and achieve better AI price performance for customers scaling those workloads. In the last 18 months, AWS has released about "twice as many machine learning and GenAI features as the other leading cloud providers combined," Jassy said on the call. "AWS' AI business is a multibillion-dollar revenue run rate business that continues to grow at a triple-digit, year-over-year percentage and is growing more than three times faster at this stage of its evolution as AWS itself grew," he said. "We felt like AWS grew pretty quickly." Jassy told listeners on the call that the Amazon Q continues to see "strong adoption," with the AI chatbot saving Amazon teams $260 million in annual cost savings, 4,500 years of development work for more than 1,000 developers and migrating more than 30,000 applications to new versions of the Java Development Kit (JDK). "Expect more practical AI game changers from Q," Jassy said. Jassy also said that Amazon is rearchitecting its Alexa virtual assistant devices with GenAI with next-generation foundational models, seeking to go beyond today's GenAI apps focused on "cost avoidance productivity," customer experience and "taking large corpuses of data and being able to summarize and aggregate and answer questions"--but not yet "really good" at taking actions for customers. "The next generation of these assistants and the generative AI applications will be better at not just answering questions and summarizing, indexing and aggregating data, but also taking actions," Jassy said. "And you can imagine us being pretty good at that with Alexa." Jassy said that Amazon's cloud business, like other vendors, has been hit by "less capacity than they have demand for," primarily with chips. Amazon's Trainium2 machine learning (ML) training chip "is starting to ramp up (in) the next few weeks, and will be very compelling for customers and price performance," Jasy said. "We're seeing significant interest in these chips, and we've gone back to our manufacturing partners multiple times to produce much more than we'd originally planned." Growing demand for AI has meant more spending on data centers, networking gear and chips more expensive than central processing unit (CPU) hardware, he said. "We invest in all that upfront in advance of when we can monetize it with customers using the resources." Jassy said that its AI business is "more fluid and dynamic than our non-AI part of AWS," but the vendor has "very significant demand signals" to avoid too much or not enough capacity and data center investment. "People aren't showing up for 30,000 chips in a day," he said. "As the market matures over time, there are going to be very healthy margins here in the generative AI space." Jassy also touted Amazon's partnership with chipmaker Nvidia, saying "we tend to be their lead partner on most of their new chips." AWS sales hit $27.5 billion, up 19 percent year over year. The cloud giant has a $110 billion annualized run rate. Operating income was $10.4 billion, up $3.5 billion year over year. Amazon Chief Financial Officer Brian Olsavsky said the vendor continues to "focus on cost control, including a measured pace of hiring," and "focus on driving efficiencies in our infrastructure and reducing costs across the business." Office staff is "down slightly year over year, and it's flat to the end of the last year," he said. Amazon's stock grew about 5 percent after market close Thursday, reaching about $196 a share.

Amazon Earnings Provide Sneak Peak Into Short-Term Future Strategy | PYMNTS.com

By now you probably know that Amazon exceeded revenue expectations for Q3 Thursday (Oct. 31) driven by the strength of its AWS cloud computing division and its fall sales events. But what you might not have seen or heard is that CEO Andy Jassy played a few cards from his 2025 strategy deck, and no, they don't all have to do solely with GenAI. Artificial intelligence (AI) played a big part in Amazon's earnings commentary, but not as dominant as earnings events this week from Apple, Google and Meta. "At a time when consumers are being careful about how much they spend, we're continuing to lower prices and ship even more quickly," Jassy told the earnings call audience, in a departure from the AI-obsessed remarks he made in previous recent earnings events. "And we can see this resonating with customers as our unit growth continues to be strong and outpace our revenue growth." That revenue growth propelled Amazon to another record for net sales, which increased 11% to $158.9 billion in the third quarter, compared with $143.1 billion in third quarter 2023. With the customer -- both consumer and business -- at the center, Jassy went into a fair amount of detail about three areas that will distinguish it in 2025 and beyond: placing AI monetization in the context of AWS as well as consumer-facing applications; an aggressive strategy for Amazon Pharmacy; and a refreshed line of Alexa devices. On the AI front Jassy positioned monetizing the technology as Alphabet CEO Sundar Pichai did on Wednesday as part of existing products, applications and services. Amazon's artificial intelligence business has emerged as a growth driver for AWS, reaching a multibillion-dollar revenue run rate, as reported on the call, with triple-digit percentage growth year over year. The company has expanded its AI offerings through its Bedrock service, recently adding new models from Anthropic, Meta, and Mistral, while reporting that AWS has released nearly twice as many machine learning and generative AI features as other leading cloud providers combined in the past 18 months. "Our AI business is growing more than three times faster at this stage of its evolution as AWS itself grew and we felt like AWS grew pretty quickly," Jassy said during the earnings call. The company has deployed AI across multiple products, including Rufus, its shopping assistant, which expanded to seven new international markets, and Amazon Q, a developer tool that Jassy said saved the company millions in a single migration project. Jassy also tipped his hand on the importance of Amazon Pharmacy. The company will expand its prescription fulfillment service to 20 more cities next year, seeing a counterpoint to current in-store experiences. "Brick-and-mortar pharmacies account for just over 90% of prescriptions dispensed in the U.S. but require customers to make trips to physical venues with much of the selection behind locked shelves, waiting in lines for meds and only find out about pricing at the point of purchase," he said. "The largest mail-order pharmacies offer deliver in five to 10 business days. We think customers deserve better. Today we can deliver to 95% of first-time Amazon Pharmacy customers in the U.S. within two business days and to 20% of U.S. prime members within 24 hours." And finally, in response to an analyst question, he addressed the controversy around developing a new generation of Alexa devices. That debut has reportedly been postponed several times, and while Jassy didn't promise a delivery date, it did sound from his comments that the new Alexa devices are in the final phases of development and will go the extra mile of actually placing order with Amazon via voice interactions. Jassy did not seem interested in new Alexa devices that simply converse with users. He clearly believed that AI has the capability to handle order, delivery and payments. "We believe that if we re-architect the brains of Alexa with next generation foundational models, which we're in the process of doing, we have an opportunity to be the leader in that space," he said. "And I think if you look at a lot of the applications today that use generative AI, there's a large number of them that are having success in cost avoidance and productivity. And then you're increasingly seeing more applications that are impacting the customer experience and being good at taking large amounts of data and being able to summarize and aggregate and answer questions, but not that many yet that are really good on top of that in taking actions for customers. "I think that the next generation of these assistants and the generative AI applications will be better at not just answering questions and summarizing indexing and aggregating data, but also taking actions. And you can imagine us being pretty good at that with Alexa."

AI push sees AWS results hit new high as cloud demand soars

Amazon has reported an 11% growth in revenue in its latest quarterly results as profits continue to soar for the ecommerce and cloud giant, which is teetering towards a $2 trillion valuation. The strong growth is largely down to the company's cloud computing succes, with AWS reporting a 19% year-over-year growth in revenue. At $27.5 billion, Amazon Web Services' third-quarter revenue equates to nearly a fifth (17.3%) of the company's entire revenue. Operating income for AWS reached a new milestone of $10.45 billion, accounting for more than three-fifths of the overall company's profit, with an operating margin of 38.1%, the highest in a decade. In the same period, Google Cloud revenues increased 35%, marking much healthier growth than that of Amazon's, however Google's cloud division revenue is only $11.4 billion - less than half of AWS'. Since Amazon's previous earnings call, AWS has launched a series of new genAI products, including its Rufus shopping assistant in Canada, France, Germany, India, Italy, Spain and the UK; AI Shopping Guides; Project Amelia for sellers; and video generation and live image capabilities for advertisers. It also added Anthropic's upgraded Claude 3.5 Sonnet, Meta's Llama 3.2, Mistral Large 2, and multiple Stability AI models to Bedrock and signed agreements with global companies like Capital One, T-Mobile and Toyota. "We've seen significant reacceleration of AWS growth for the last four quarters," Amazon CEO Andy Jassy summarized on the company's earnings call. While cloud shows no signs of slowing down, Amazon is also anticipating growth across its ecommerce business in the next three months. The busy festive period, driven by a handful of major consumer sales, will be met by the temporary hiring of seasonal staff globally. Jassy added that "there's so much more coming" including "over 100 new cloud infrastructure and AI capabilities," which will be shared at the upcoming re:Invent conference in December 2024.

AWS tops $10 billion in quarterly operating income as revenue leaps 50% year-on-year on back of gen AI boom

Amazon's cloud business has re-accelerated, according to CEO Andy Jassy, topping $10 billion in operating income for the first time and now accounting for more than 60% of total Amazon operating profit. For Q3, AWS posted $10.4 billion in operating income, up 50% year-on-year, on revenue of $27.4 billion, up 19%. Jassy commented: We've seen significant re-acceleration of AWS growth for the last four quarters. With the broadest functionality, the strongest security and operational performance and the deepest partner community, AWS continues to be a customer's partner of choice. There are signs of this in every part of AWS's business. We see more enterprises growing their footprint in the cloud, evidenced in part by recent customer deals with the ANZ Banking Group, Booking.com, Capital One, Fast Retailing, Itaú Unibanco, National Australia Bank, Sony, T-Mobile, and Toyota. You can look at our partnership with NVIDIA called Project Ceiba, where NVIDIA has chosen AWS's infrastructure for its R&D supercomputer due in part to AWS's leading operational performance and security. And you can see how AWS continues to innovate in its infrastructure capabilities. With deliveries like Aurora Limitless Database, which extends AWS's very successful relational database to support millions of database writes per second and manage petabytes of data whilst maintaining the simplicity of operating a single database or with our custom Graviton4 CPU instances, which provide up to nearly 40% better price performance versus other leading x86 processors. Interest in generative AI appears to be playing a large part in this uptick in business, he suggested: Companies are focused on new efforts again, spending energy on modernizing their infrastructure from on-premises to the cloud. This modernization enables companies to save money, innovate more quickly, and get more productivity from their scarce engineering resources. However, it also allows them to organize their data in the right architecture and environment to do generative AI at scale. It's much harder to be successful and competitive in generative AI if your data is not in the cloud. In terms of AI, the AWS operation continues to expand, said Jassy: In the last 18 months, AWS has released nearly twice as many machine learning and gen AI features as the other leading cloud providers combined. AWS's AI business is a multi-billion-dollar revenue run rate business that continues to grow at a triple-digit year-over-year percentage and is growing more than three times faster at this stage of its evolution as AWS itself grew, and we felt like AWS grew pretty quickly. We talk about our AI offering as three macro layers of the stack, with each layer being a giant opportunity and each is progressing rapidly. At the bottom layer, which is for model builders, we were the first major cloud provider to offer NVIDIA's H200 GPUs through our EC2 P5e instances. And thanks to our networking innovations like Elastic Fabric adapter and Nitro, we continue to offer advantaged networking performance. And while we have a deep partnership with NVIDIA, we've also heard from customers that they want better price performance on their AI workloads. Amazon is also 'eating its own dog food' when it comes to AI, he added: We're also using generative AI pervasively across Amazon's other businesses with hundreds of apps in development or launched. For consumers, we've expanded Rufus, our Generative AI-powered expert shopping assistant to the UK, India, Germany, France, Italy, Spain, and Canada. And in the US, we've added more personalization, the ability to better narrow customer intent and real-time pricing and deal information. We've recently debuted AI Shopping Guides for consumers, which simplifies product research by using Generative AI to pair key factors to consider in a product category with Amazon's wide selection, making it easier for customers to find the right product for their needs. For sellers, we've recently launched Project Amelia, an AI system that offers tailored business insights to boost productivity and drive seller growth. We continue to rearchitect the brain of Alexa with a new set of foundation models that we'll share with customers in the near future, and we're increasingly adding more AI into all of our devices. Take the new Kindle Scribe we just announced. The note-taking experience is much more powerful with the new built-in AI-powered notebook, which enables you to quickly summarize pages of notes into concise bullets in a script font that can easily be shared. In common with the likes of Microsoft and Meta, AWS also had some tough love for Wall Street in terms of its ongoing commitment to keep boosting CapEx on the back of generative AI demand. The firm expects to spend around $75 billion in 2024, with $51.9 billion spent to date. This is "really driven by generative AI", according to CFO Brian Olsavsky - and there's more to come, warned Jassy: I suspect we'll spend more than that in 2025. And the majority of it is for AWS and specifically, the increased bumps here are really driven by generative AI...The thing to remember about the AWS business is the cash life cycle is such that the faster we grow demand, the faster we have to invest capital in data centers and networking gear and hardware. And of course, in the hardware of AI, the accelerators or the chips are more expensive than the CPU hardware. And so we invest in all of that upfront in advance of when we can monetize it with customers using the resources. But of course, a lot of these assets are many year useful life assets. Data centers, for instance, are useful assets for 20 to 30 years. And so I think we've proven over time that we can drive enough operating income and free-cash flow to make this a very successful return on invested capital business and we expect the same thing will happen here with generative AI. It is a really unusually large maybe once in a lifetime type of opportunity. And I think our customers, the business and our shareholders will feel good about this long-term that we're aggressively pursuing it. People don't necessarily appreciate the logistical challenge that AWS presents, he argued: If you think about, we have 35 or so regions around the world, which is an area of the world where we have multiple data centers, and then probably about 130 availability zone through data centers, and then we have thousands of SKUs we have to land in all those facilities. And if you land too little of them, you end up with shortages, which end up in outages for customers. So most don't end up with too little, they end up with too much. And if you end up with too much, the economics are woefully inefficient. And I think you can see from our economics that we've done a pretty good job over time at managing those types of logistics and capacity. And he offered up a crumb of comfort to the 'show us the money' brigade:

Amazon CEO pledges AI investments will pay off as capital expenditures surge 81%

Amazon CEO, Andy Jassy speaking with CNBC's Jim Cramer on Mad Money in Seattle, WA. on Dec. 6th, 2023. Amazon CEO Andy Jassy is trying to reassure investors who may be worried about the future payoff of the company's massive investments in generative artificial intelligence. On a conference call with analysts following the company's third-quarter earnings report on Thursday, Jassy pointed to the success of Amazon's cloud computing business, Amazon Web Services, which has become a crucial profit engine despite the extreme costs associated with building data centers. "I think we've proven over time that we can drive enough operating income and free cash flow to make this a very successful return on invested capital business," Jassy said. "We expect the same thing will happen here with generative AI." Amazon spent $22.6 billion on property and equipment during the quarter, up 81% from the year before. Jassy said Amazon plans to spend $75 billion on capex in 2024 and expects an even higher number in 2025. The jump in spending is primarily being driven by generative AI investments, Jassy said. The company is rushing to invest in data centers, networking gear and hardware to meet vast demand for the technology, which has exploded in popularity since OpenAI released its ChatGPT assistant almost two years ago. "It is a really unusually large, maybe once-in-a-lifetime type of opportunity," Jassy said. "And I think our customers, the business and our shareholders will feel good about this long term that we're aggressively pursuing it." AI spending was a big topic on tech earnings calls this week. Meta on Wednesday raised its capital expenditures guidance, and CEO Mark Zuckerberg said he was "quite happy" with the team's execution. Meanwhile, Microsoft's investment in OpenAI weighed on its fiscal first-quarter earnings released on Wednesday, and the company said capital spending would continue to rise. A day earlier, Alphabet CFO Anat Ashkenazi warned the company expects capital spending to grow in 2025. Amazon has said its cloud unit has picked up more business from companies that need infrastructure to deploy generative AI models. It's also launched several AI products for enterprises, third-party sellers on its marketplace and advertisers in recent months. The company is expected to announce a souped-up version of its Alexa voice assistant that incorporates generative AI, something Jassy said will arrive "in the near future." Amazon hasn't disclosed its revenue from generative AI, but Jassy said Thursday it's become a "multi-billion-dollar revenue run rate" business within AWS that "continues to grow at a triple-digit year-over-year percentage." "It's growing more than three times faster at this stage of its evolution as AWS itself grew, and we felt like AWS grew pretty quickly," he added.

Amazon CEO Says GenAI Is Growing Three Times Faster Than Cloud Computing Did

Colin is an Associate Editor focused on tech and financial news. He has more than three years of experience editing, proofreading, and fact-checking content on current financial events and politics. He received his M.A. in journalism from The New School and his B.A. in history and political science from McGill University. The growth of generative artificial intelligence businesses is surprising even the tech industry's most seasoned executives. Amazon's (AMZN) AI business is growing three times as fast as its cloud business did at a comparable stage of evolution, CEO Andy Jassy said on a conference call with analysts Thursday. "And we thought AWS grew pretty quickly," Jassy added, referring to the Amazon Web Services cloud-computing division he led before becoming CEO in 2021. Amazon on Thursday topped Wall Street's estimates with its third-quarter earnings. Cloud revenue grew 19% to more than $27 billion. Sales at the unit have accelerated this year amid surging demand for AI. Amazon's AI business, which Jassy said is already growing by triple-digit percentages, could grow even faster once the company has the infrastructure to support booming demand, the CEO said. "Pretty much everyone today has less capacity than they have demand for," Jassy said. Jassy's comments echoed those of Microsoft executives who, on their company's earnings call Wednesday, said that AI demand "continues to be higher than our available capacity." Microsoft's challenges bringing cloud capacity online was a key factor behind the company's disappointing revenue guidance and the subsequent tech sell-off Thursday. (Amazon did not provide a comparable cloud revenue forecast for the current quarter on Thursday.) Jassy said that semiconductors are currently the hardware holding companies back from meeting demand. Amazon has developed its own AI chips -- Trainium for training models and Inferentia for running those models -- as it seeks to plug the gap between demand and supply for AI hardware. Trainium 2, the chip's second iteration, "will start to ramp up in the next few weeks," Jassy said. "And we have a lot of customer interest."