Amazon's MVP Earnings Has Wall Street Losing Their Collective Minds - But Why?

Alright, we all know Amazon was the MVP of last week's earnings, stealing the show with their Viagra type response that got the market horned up on Friday - but, we haven’t really dove into the actual carnage it created that had Wall Street drooling over their spreadsheets. So without further ado, welcome to this Sunday's edition of “What in the actual hell happened?”. 

(Source: Giphy) 

In short, Amazon bolstered an impressive 7% pop in share price after they posted earnings of $1.43 per share, blowing past the expected $1.14. In addition, revenue came in at a whopping $158.88 billion, again beating the $157.2 billion analysts had penciled in. In fact, if you were listening closely when those numbers dropped, you could almost hear Andy Jassy whisper “Eat that ‘itches” to all the Big Tech skeptics last week. 

(Source: Reuters) 

On the other hand, the real juice of this report? Yeah, it came from Amazon’s two crown jewels: Amazon Web Services and advertising.

Simply put, AWS, Amazon’s cloud computing arm that’s essentially printing money hand over fist, brought in $27.4 billion in revenue for the quarter. Sure, it missed the Street’s expectations by a slim margin (Wall Street wanted $27.5 billion, but let’s be real, $100 million is just pocket change in this arena), however, the real gripping numbers was that AWS grew 19%, compared to last year. That’s a faster pace than the 12% growth from the same period in 2022, meaning things are absolutely booming in the right direction.

(Source: Reuters) 

The not so good part? AWS is playing catch-up with its cloud rivals. Microsoft reported a 33% increase in its Azure cloud revenue, and Google Cloud isn’t far behind with a 35% boost. So while things are moving forward for Amazon, they’ll need to be blessed with a famous Biden curve phenomenon in order to take the lead. 

(Source: X) 

What’s more is that, Amazon is still dropping serious cash to stay in the game. Capital expenditures surged 81% year-over-year, ballooning from $12.48 billion to $22.62 billion. What’s all that money for? Glad you asked. Most of it is being funneled into AI infrastructure—think Nvidia chips, brand new data centers, and probably a few secret projects that sound like something straight out of a George Lucas movie collection. 

But, but, but… Jassy, always one to think big, is calling AI a “once-in-a-lifetime type of opportunity.” Translation: expect Amazon to keep burning through cash like me in the 90s with an unlimited stack of tokens at Chuck E. friggin ‘Cheese. The company’s planning to spend about $75 billion on capital expenditures in 2024, and Jassy hinted that 2025 might even see more spending. Bold move Cotton, let’s see if it pays off for ‘em. 

(Source: CNBC) 

On the advertising front though, Amazon’s ad business is, in short, still defying gravity while raking in $14.3 billion—which is right on the money with StreetAccount’s estimates.  That’s another 19% year-over-year increase, outpacing Amazon’s core retail growth. Meaning, while Meta and Google still dwarf Amazon in ad revenue, Amazon’s becoming an increasingly formidable player in the space. Plus, with ads now showing up in Prime Video, Bezos’ brainchild is finding more ways to make money off us while we all binge-watch The Boys.

(Source: Giphy) 

Over in the land of shampoo and dog food (i.e., Amazon’s retail business), things aren’t as flashy, but they’re still solid. North American sales grew 9%, bringing in $95.5 billion and helping to deliver $5.7 billion in operating profit. This obviously included the massive Prime Day in July that generated $13.7 billion in sales alone. 

But, what about the guidance?! 

Ahh yes, can’t forget that one. Looking ahead, Amazon expects fourth-quarter revenue to land between $181.5 billion and $188.5 billion. Wall Street was hoping for a little more (the midpoint of that range is just shy of the $186.2 billion analysts wanted), but let’s not nitpick, especially as it’s not as depressing as Microsoft, Meta, and Apple guidance. 

(Source: Giphy) 

Plus, the holiday season is coming, and even though Wall Street was hoping for a bit more, Amazon has fast shipping and lower-cost items on their side - And Wall Street knows that machine is expected to pull in a blizzard of cash. 

So all in all, it’s been a good quarter for Amazon, and if Jassy’s AI bet pays off, we might be looking at a whole new era for the all-around tech giant. In the meantime, place your bets accordingly, especially in the tech space and as always stay safe and stay frosty this Sunday, friends! Until next time…

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Stocks.News holds positions in Amazon, Microsoft, Meta, and Apple as mentioned in the article.