Amazon Q3 2024 Earnings: Investors On Cloud Nine

TradingKey - Among the large cloud computing companies, no one is bigger than Amazon.com Inc (NASDAQ: AMZN). Of course, Amazon is best known for its leading position in online retail but it’s been the company’s Amazon Web Services (AWS) – its cloud unit – that has been driving profits.

Amazon reported its Q3 2024 earnings on Thursday (31 October) after the market closed in the US and investors were happy with their numbers as Amazon shares rose 6% in after-hours trading following the release. Here’s why.  

Revenue beats, operating profit a standout

For the third quarter of 2024, Amazon delivered revenue of US$158.9 billion, up 11% year-on-year, and ahead of estimates of just over US$157 billion. However, it was on the profit line where the company really delivered some stunning numbers as Amazon posted operating profit of US$17.4 billion, blowing past the average estimate of US$14.7 billion.

All three of its businesses continued to perform well; e-commerce, cloud, and advertising. The company has also been able to get its costs under control after a concerted effort by the company to cut costs where possible and optimise its logistics operation.

Amazon saw its total operating expenses for the quarter rise 7.2% year-on-year to US$141.5 billion. While sizeable, it was the seventh consecutive quarter where Amazon’s top line growth (i.e. revenue) outpaced its costs growth.

Cloud the standout performer

On the cloud side, AWS saw revenue increase 19% year-on-year to US$27.5 billion but it was the unit’s operating income of US$10.4 billion, ahead of consensus expectations of US$9.12 billion, that left investors impressed. The pickup in the sales growth for AWS – from last year’s slowdown when tech budgets were tighter and Q3 2023 growth for the unit came in at 12% – also means the acceleration is a bright spot.

For Amazon’s retail business, the company saw that unit post sales of US$61.4 billion for Q3 2024, up 7% year-on-year. And the firm’s “dark horse” growth unit of advertising delivered another solid quarter with revenue rising 19% year-on-year to US$14.3 billion.  

The company has launched several of its artificial intelligence (AI) products for its cloud and e-commerce businesses and CEO Andy Jassy, on the earnings call, stated that generative AI is a “really unusually large, maybe once-in-a-lifetime opportunity”. As a result, he went on to say that shareholders will “feel good about this long term, that we’re aggressively pursuing it”.

Capex sees big surge

Like all cloud computing giants, Amazon saw a large rise in its capital expenditure (capex) for the period. For Q3 2024, its capex soared 81% year-on-year to US$22.62 billion and CEO Jassy said the company plans to spend a total of US$75 billion for the whole of 2024. He also clarified that the company expects to spend more on capex in 2025.

In terms of guidance, Amazon was pretty upbeat with the company projecting operating income of approximately US$18 billion, ahead of estimates. On the revenue front, Amazon guided for US$188.5 billion in Q4 2024, exceeding expectations, as the company starts to ramp up for the shopping holiday season and various mega online shopping events like Black Friday and Cyber Monday.

So far in 2024, Amazon shares are up 24.2% and over the past year the company has given investors a 39.9% positive share price return.