Sales and Operating Profit of $147.98 Billion and $14.7 Billion
The second-quarter sales of Amazon, the world's largest e-commerce company, fell short of market expectations. In addition, it was revealed that Amazon's costs for building artificial intelligence (AI) infrastructure surged significantly.
Amazon announced on the 1st (local time) that its second-quarter (April to June) revenue and operating profit reached $147.98 billion and $14.7 billion, respectively. While the operating profit exceeded the market forecast of $13.6 billion, the revenue fell short of the expected $148.56 billion.
Amazon Web Services (AWS), the cloud service, posted revenue of $26.3 billion, up 19% from a year earlier. This slightly exceeded the market estimate of $26 billion. Despite fierce competition with big tech companies such as Microsoft (MS) and Google, AWS achieved quarter-over-quarter growth for the second consecutive quarter.
Advertising revenue was recorded at $12.8 billion, a 20% increase from a year ago. However, it fell short of the market expectation of $13 billion, and growth slowed compared to the 24% increase in the first quarter.
Amazon reported that the company's total capital expenditures rose 50% year-over-year to $17.6 billion, surpassing the market estimate of $16.41 billion. Most of the capital expenditures include costs for building cloud and generative AI infrastructure.
The reason for the sharp increase in capital expenditures is that Amazon is engaged in fierce, costly competition with MS in the cloud computing market. When MS launched AI-based cloud services, Amazon collaborated with UK AI startup Anthropic and others, offering free services to increase the market share of its AI platform 'Bedrock,' which is a representative example.
Bloomberg News added that the market interprets such AI-related capital expenditures by big tech as excessive relative to demand. Amazon expects its third-quarter operating profit to be between $11.5 billion and $15 billion, which is lower than analysts' forecast of $15.1 billion.
On the day, Amazon's stock closed down 1.57% on the New York Stock Exchange and showed a decline of around 5% in after-hours trading following the earnings announcement. Amazon's stock price had risen about 21% up to that day.
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