Amazon’s stock soars 12% on third-quarter beat and increased spending guidance
News Summary
Amazon shares soared 12% on Friday after the company reported an across-the-board beat for the third quarter and boosted its spending forecast due to demand for artificial intelligence services. Amazon Web Services (AWS) sales climbed 20% year-over-year to $33 billion, exceeding expectations, and generated $11.4 billion in operating income, accounting for roughly two-thirds of Amazon’s total. Digital advertising revenue jumped 24% to $17.7 billion. Total sales grew 13% to $180.17 billion, and earnings per share came in at $1.95, both topping analyst estimates. The company raised its 2025 capital expenditure forecast to $125 billion from an earlier estimate of $118 billion, with further increases expected in 2026, primarily driven by robust AI service demand. Despite strong results, Amazon announced 14,000 corporate layoffs this week, with CEO Andy Jassy attributing them to culture and organizational layers, not financial reasons or AI “right now.”
Background
Amazon is a leading provider of cloud infrastructure technology, with its AWS unit being a primary engine for growth and profit. However, prior to this earnings report, Amazon faced intense competition in cloud services from rivals like Microsoft and Google, alongside market perception that it was potentially missing out on lucrative AI cloud service deals. Ahead of this report, Amazon's stock was up only 1.6% year-to-date, trailing its megacap peers significantly. Concurrently, other tech giants, including Google and Microsoft, also reported strong cloud revenue growth and raised their capital expenditure guidance, underscoring the ongoing investment race in AI-driven data centers and infrastructure.
In-Depth AI Insights
What does Amazon's aggressive capital expenditure increase truly signal beyond stated AI demand? - This isn't just reacting to current demand; it's Amazon's strategic intent to solidify long-term cloud dominance, especially in AI infrastructure, and to preempt future competition. - It's a land grab for future AI workloads, ensuring AWS remains the go-to platform for nascent AI innovation. - It could also be a defensive move to counter accelerating growth from Microsoft Azure and Google Cloud, demonstrating a firm commitment to scale and innovation. - Such massive capex might reflect a