Amazon reported major revenue and profit increases during its third quarter, beating Wall Street’s forecasts, based largely on the company’s e-commerce sales and increasing demand for its cloud services. Capital expenditure, which reached a record amount following Amazon’s recent investments in artificial intelligence, will maintain its momentum as the company plans $75 billion capex on developing generative AI services over 2024-2025. “The faster we grow demand, the faster we have to invest capital in data centers, network gear and hardware,” explained CEO Andy Jassy. “We invest in all that upfront in advance of when we can monetize it.”

“Many top technology companies have been ramping up spending on the expensive chips, data centers and real estate needed to meet the anticipated demand for computing power from AI,” reports The Wall Street Journal. “Amazon’s capex jumped more than 80 percent to $22.62 billion last quarter, its biggest-ever quarterly spend. The company’s net sales rose 11 percent to $158.87 billion and its net income rose 55 percent to $15.33 billion.”

WSJ points out that several notable earnings announcements “underlined the focus on capital expenditure.” For example, “the $53 billion that Microsoft has spent this year represents about 28 percent of the company’s revenue,” while “Meta Platforms said it plans to spend between $38 billion and $40 billion on capex this year.”

Competition in the AI space continues at a furious pace and Jassy sees Amazon as an industry leader. “The company has created special teams to drive generative AI innovation and has released a flurry of services, including an AI shopping assistant on its app named Rufus,” explains WSJ. During Thursday’s earnings call, Jassy hinted at an agentic version of the company’s Alexa assistant (code-named “Remarkable Alexa”).

“I think that the next generation of these assistants and generative AI applications will be better at not just answering questions and summarizing, indexing, and aggregating data, but also taking actions,” he said during the call. “And you can imagine us being pretty good at that with Alexa.”

According to TechCrunch, Amazon initially announced plans to upgrade Alexa with AI last year, and “is said to be replacing its own Alexa-powering models with Anthropic’s after encountering technical challenges.”

The new version of Alexa “will reportedly cost $5 to $10 per month, offered alongside a less capable free plan,” possibly by October, although it is reportedly struggling with delays. Bloomberg indicates “Amazon is eager to take on ChatGPT, but technical challenges have forced the company to repeatedly postpone,” and may not launch until 2025.

Meanwhile, as part of Amazon’s AI build-out, the company is cutting costs in other divisions and hired veteran engineering exec Matt Garman in May as the new CEO of Amazon Web Services. Revenue from AWS “grew by 19 percent to $27.45 billion,” reports WSJ. “The business is the company’s main profit driver and has shown renewed strength after experiencing a slowdown in 2023.”

Related:
Tech Giants See AI Bets Starting to Pay Off, The Wall Street Journal, 11/1/24
Meta and Microsoft: AI’s Spending Champs Won’t Be Tapping the Brakes, The Wall Street Journal, 10/31/24
Amazon, Google Show Profit Growth Can Quiet Fears Over Heavy AI Spending, Yahoo! Finance, 11/1/24