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Amazon’s cloud division, Amazon Web Services (AWS), reported a 19% increase in revenue for the second quarter, surpassing analysts’ expectations. AWS generated $26.28 billion in revenue, beating the anticipated $26.02 billion, according to StreetAccount.
AWS’s growth rate outpaces Amazon’s overall performance, underscoring its critical role within the company’s portfolio. The cloud unit, now led by CEO Matt Garman, who took over from Adam Selipsky in May, continues to face stiff competition from major players like Google, Microsoft, and Oracle. These companies are aggressively expanding their cloud services, particularly with investments in artificial intelligence (AI) technologies.
Garman, who previously oversaw sales, marketing, and global services, as well as compute services including EC2, steps into the leadership role as AWS maintains its position as a market leader in cloud infrastructure. However, competitors are quickly gaining ground. For instance, Microsoft Azure and Google Cloud recently reported 29% revenue growth, bolstered by early AI model deployments.
The surge in demand for cloud services is driven in part by the deployment of generative AI models, which support applications like OpenAI’s ChatGPT. AWS is ramping up its capital spending in 2024, with significant investments in Nvidia graphics processing units (GPUs) to support the training and operation of these AI models. This strategic move is expected to generate substantial revenue in the future.
Amazon CEO Andy Jassy, who previously led AWS, emphasized the strong demand for AI infrastructure during a call with analysts. “We’re investing heavily in the AI space and infrastructure, and we aim to increase our capacity significantly,” Jassy stated. “The demand is robust, and we anticipate this to be a highly lucrative business.”
AWS now constitutes 18% of Amazon’s total revenue, playing an even more significant role in the company’s profitability. The cloud division reported an operating income of $9.3 billion for the quarter, accounting for 63% of Amazon’s total operating income. This result also exceeded analysts’ expectations, who had projected $8.51 billion in operating income for AWS.
As AWS continues to expand and invest in emerging technologies, it remains a cornerstone of Amazon’s business strategy, contributing significantly to both the company’s revenue and profit margins.