AWS tops $10B in quarterly operating profit as Jassy cites ‘reacceleration’ of cloud business

Amazon’s cloud business isn’t done growing yet.

Amazon Web Services posted $10.4 billion in operating income in the third quarter, up 50% from a year ago, surpassing $10 billion for the first time, and accounting for more than 60% of Amazon’s overall operating profits.

AWS revenue rose 19% to $27.4 billion in the quarter.

“We’ve seen significant reacceleration of AWS growth for the last four quarters,” said Amazon CEO Andy Jassy on the company’s earnings conference call, after Amazon’s overall results topped Wall Street’s expectations.

Jassy said AI is playing a role in driving AWS growth, both directly and indirectly.

He explained that AWS customers “are focused on new efforts again, spending energy on modernizing their infrastructure from on-premises to the cloud. This modernization enables companies to save money, innovate more quickly, and get more productivity from their scarce engineering resources.”

Jassy said this “also allows them to organize their data in the right architecture and environment to do generative AI at scale. It’s much harder to be successful and competitive in generative AI if your data is not in the cloud.”

Amazon Web Services went through a leadership transition earlier this year, with longtime executive Matt Garman succeeding Adam Selipsky as CEO of the cloud unit. As Amazon founder Jeff Bezos liked to say, quarterly results are often determined by decisions made and strategies established years before.

AWS operating margin, a key measure of profitability as a percentage of sales, reached a new high of 38.1% in the quarter.

Google Cloud’s quarterly operating margin was 17.1%, by comparison, with $1.95 billion in profits on $11.4 billion in revenue, in the most recent quarterly results for its parent company, Alphabet.

Microsoft on Thursday posted a 33% increase in its revenue from Azure and other cloud services, including 12 percentage points of growth from artificial intelligence. Microsoft does not report revenue or profits specifically for its Azure cloud business, which competes with AWS and Google Cloud.

On the Amazon conference call, CFO Brian Olsavsky said factors boosting the AWS margins included accelerating demand for AWS services, and a push for efficiencies and cost controls across the business, including more cautious hiring. In addition, he said, the company made a change in 2024 to extend the useful life of its servers.

Amazon expects approximately $75 billion in capital expenditures in 2024, Olsavsky said, explaining that the majority of this spending will be on technology infrastructure, primarily related to AWS.

Jassy said he suspects the company’s capital spending to be even higher in 2025, explaining that the increase is “really driven by generative AI,” and noting that he believes the investment will ultimately be worth it.

“Our AI business is a multi-billion dollar business that’s growing triple-digit percentages year-over-year, and it’s growing three times faster at this stage of evolution than AWS,” Jassy said. AWS, he added, “grew pretty fast.”