On Tuesday, Amazon announced its first quarter earnings that exceeded Wall Street’s expectations, mainly due to the growth seen in its cloud division and advertising side. The cloud revenue increased by 17% year over year for the first three months, which was $25.04 billion, because of generative AI contributions, which now stand at multibillion, and the company hopes that it will continue to profit from it for the next decade or two.
Amazon’s operating profit now relies heavily on AWS
AWS sales were expected to be $24.5 billion with a 12% increase, which it surpassed by almost 5% despite the slowdown in sales due to the companies trimming down their cloud expenditures, but Amazon officials are expecting that generative AI demand will increase and benefit the cloud business.
Amazon is now one of the major tech outfits, along with its traditional online retail business model, as new startups continue to seek its database and computing services, along with governments and larger companies. AWS’s operating profit covered more than half of Amazon’s entire operating profit, which came out to be $9.42 billion because of the good margins of software as compared to tangible goods that it sells.
Considering the more than $25 billion revenue of Amazon web services for three months, it has currently achieved a $100 billion annual run rate. Amazon’s CEO, Andy Jassy, highlighted generative AI’s potential for the company’s future business and also for its clients utilizing its service called Bedrock. He also expects more customer acquisition as companies adopt generative AI along with retaining their existing wide customer base.
Generative AI at AWS will fuel growth
Many companies rely on AWS services along with Anthropic, in which Amazon said it had injected $4 billion as a partner, and Anthropic also counts on AWS silicon chips for training its large language model that supports their products.
Companies using AWS services to operate their AI models could be a good long-term opportunity for their business, said Amazon officials, as according to Jassy, generative AI-related businesses are on the right track and will fetch good revenues, contributing to AWS’s total revenue by billions of dollars this year alone. He expected the AI boom could last for the next 10 or 20 years as their customer companies converted to the technology. Jassy said that usually, it takes a lot of work to transfer from your existing base to a cloud, but with generative AI, the workloads will transform on the cloud.
Amazon is investing heavily in infrastructure to meet the demands of artificial intelligence. To expand its infrastructure footprint to support customers Amazon plans to launch new infrastructure regions in Mexico and the Kingdom of Saudi Arabia, which will give entrepreneurs, developers, enterprises, and startups a better choice for running their services and serving their customers.
AWS is planning an investment of $5 billion in Mexico and $5.3 billion in the Kingdom of Saudi Arabia over the next few years as a part of its long-term infrastructure commitments. AWS also plans to invest $10 billion to construct two data centers in Mississippi, which will be its largest capital investment in the state, and it will create 1,000 jobs as well. The centers will support educational training. Amazon officials also said that a capital expenditure of $14 billion has been made in the past quarter and will increase in the subsequent quarters of the year.