The CEO of Amazon, Andy Jassy
Brendan McDermid | Reuters
Amazon On Thursday, the profit reported in the second quarter, which exceeded the expectations of most metrics, but the results were not good enough to please Wall Street.
Amazon Stock slipped after the publication and during the entire conference call. The shares closed by 8%on Friday. The share has decreased by about 2% to date.
The profit instruction was weaker than expected, while the growth of the cloud underwear investors.
This overshadowed an otherwise optimistic report, which included strong sales and profits, constant retail growth and an increase in the advertising contract by 23%. Amazon also offered rosy sales forecast for the current quarter.
Here are three important snack bars from Amazon's income:
Ki spending boost
Amazon reported that it spent 31.4 billion US dollars for investment costs in the last quarter, and the company expects this to be “somewhat representative” for its expenses in the second half of the year. In the first quarter, Amazon's capital expenditure exceeded 24 billion US dollars.
Taken together, this means that Amazon could spend more than 118 billion US dollars for the investment expenses this year, according to its earlier forecast of $ 100 billion. Amazon's Capex, which reached 83 billion US dollars a year ago, will mainly get into the development of the technical infrastructure to support the demand for artificial intelligence.
Amazon's competitors also throw a lot of money on AI.
On Wednesday, Meta Raised its forecast for capital expenditure to a range of $ 66 billion to $ 72 billion. Google Parent alphabet This year, its capital expenditure increased to 85 billion US dollars last week.
The question of the heads of the investors is if these large AI bets are paid out in sales or in profit.
Andy Jassy, CEO of Amazon, interpreted that the company's progress on AI improved his “operational efficiency and business growth”, but offered only a few details about it.
Amazon has already said that generative AI makes sales to AWS to an annualized interest rate that corresponds to “several billion dollars”.
At a telephone conference with investors, Jassy pointed to Alexa+Hin, an improved version of his digital assistant to monetize the AI. The service, which started in early access at the end of March, is $ 19.99 per month or free of charge for Prime members.
“I think over time you could also imagine, because we always add the functionality that there could be a kind of subscription element that goes beyond what is there today,” said Jassy.
Jassy repeated that it is “very early day” in AI development and execution.
Cloud rival
Amazon Web Services continues to head the Cloud infrastructure market, but is confronted with steeper competition with Microsoft Azure and Google Cloud, which organized stronger growth rates in their latest quarterly results.
AWS increased its sales by 18% compared to the previous year, which defeated the Wall Street estimates. That remained the big winnings from Microsoft and Alphabet. The companies recorded Cloud growth rates of 39% or 32%.
Analysts asked Amazon Leadership on the call why his cloud business does not grow as quickly as his competitors.
“There is currently a Wall Street Finance person's narrative that AWS in generative AI with concerns about the loss of the same age, etc. near AI,” said Brian Nowak, analyst by Morgan Stanley. The company has an overweight rating for Amazon's share.
The participants go through an exhibition hall at AWS Re: Invent, a conference that will be held on December 3, 2024 by Amazon Web Services in Las Vegas.
Noah Berger | Getty pictures
The JPMorgan analyst Doug Mermuth said that it was “much faster growth of cloud growth between the second and number three players”.
Jassy said sometimes the company grows faster than competitors and vice versa, but AWS still has a “sensible” cloud business.
“I think the second player is about 65% of the AWS size,” he said.
Jassy also seemed at Microsoft about a recently global attack on his SharePoint collaboration software and said AWS customers see a “very big difference” in security.
“You could only see what has happened in the past few months. You can see some of these players a kind of adventure with some of these players,” said Jassy.
Some investors could not influence the comments.
Bernstein analysts said on Friday that the “sound was not great” and that Amazon's explanation for his competitive position and trajectory “less constructive than colleagues”.
“Words are important … but numbers are more important,” the analysts wrote.
Tari hairdresser better than feared
In May, Amazon warned that it was potential uncertainties that are associated with the changing tariff and trade policy of President Donald Trump.
At that time, Imported products of a steep delivery of 145% were exposed to China. This threatened to increase the costs for Amazon providers and its millions of third-party sellers, which caused concerns about price increases and a decline in consumer demand.
Since then, the USA and China have reached an armistice, with China being exposed to 30% with a combined tariff rate.
Amazon's most recent income showed that the company seems to navigate the tariffs and the trade policy shifted better than Wall Street feared.
Sales in his online shop rose to the analyst projections and rose by 11%compared to the previous year, while sales from Seller Services also exceeded expectations. The number of articles sold in the online and physical shops of Amazon increased by 12%, which indicates that the consumer remains “healthy” despite customs duties and economic uncertainties.
Amazon's sales forecast in the third quarter, which implies 13% in high-end growth, indicates that “tariffs by suppliers, dealers and customers seem to have been effectively absorbed,” wrote the citizens' analysts. You have an outperform rating for the company's shares.
Jassy struck a positive but cautious tone on the call and said that it was “difficult to know” where the tariffs will settle, especially when it comes to China.
“At this point we are not sure who will pay these higher costs,” he said.
A contract between the United States and China has not been concluded, and the two countries have reached a final agreement until August 12.
So far, Amazon has survived Trump's trade war.
“We simply did not see any reduced demand and we have not seen a comprehensive size [average selling price] Increases, “said Jassy on the call.” That could change in H2. There are many things we don't know, but we have seen that so far. “
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