AMZN: Amazon Stock Nosedives on Revenue Miss, 50% Jump in Spending on AI

Amazon reported stellar quarter on earnings but its revenue missed expectations. Can AI make operations blossom again?

• Amazon stock AMZN nosedived over 7% ahead of Friday’s opening bell as investors reacted to the company’s weaker-than-expected June-quarter report. Revenue for the ecommerce and cloud computing giant landed at $148 billion, up 10% year-on-year but some $700 million shy of Wall Street’s consensus views. Earnings per share hit $1.26, a majestic 94% rise from last year to log net income of $13.5 billion. But sales weren’t as good as projected. And that’s when AI comes to the rescue.
• Andy Jassy, Amazon’s chief executive officer, talked up the opportunity in AI, saying that the hot tech will drive solid growth in the company’s cloud business — Amazon Web Services (AWS). The cloud division, generating the majority of Amazon’s profits, picked up $26.3 billion in revenue, a 19% increase from last year’s quarter. But big spending on AI narrowed down the profit margin by 2% to 36%, causing investors to fret over costs for investments in AI tools. Amazon said it bumped investments in equipment — where AI sits — by 50% to $17.6 billion.
• Markets are getting increasingly cost-conscious when it comes to how much Big Tech shells out on artificial intelligence. Amazon’s spending spree is the latest example of that, following Microsoft’s big-ticket splurge for the same quarter. Amazon’s chief financial officer Brian Olsavsky said on Thursday that capital spending in the second half will surpass the first half’s expenses. Shares of Amazon are up 22% on the year ahead of today’s session. In late June, Amazon crossed the $2 trillion mark.