Amazon pulled off its monster quarter despite being left out of OpenAI’s tangle of deals
Amazon’s AWS revenue grew 20% year on year, and will hit $125 billion in capex for the year. CEO Andy Jassy said the 14,000 jobs cut weren’t about money, but about “culture.”
Amazon may not be found in the tangled web of massive deals that are passing billions between OpenAI, Nvidia, Advanced Micro Devices, SoftBank, and Oracle, but that doesn’t mean it isn’t making bank from the AI race.
Last night, Amazon reported strong third-quarter earnings, beating Wall Street’s expectations on earnings and revenue. Shares were up over 10% in early trading this morning, and the stock opened at a record high of $250.10.
All eyes were on Amazon’s AWS cloud computing unit, which saw revenues grow 20% year on year, ringing up $33 billion in sales, just above analyst estimates. Demand for AWS computing was huge, and a backlog of contracted business is piling up.
On the earnings call, Amazon CEO Andy Jassy said:
“Backlog grew to $200 billion by Q3 quarter end, and doesn’t include several unannounced new deals in October, which together are more than our total deal volume for all of Q3. AWS is gaining momentum.”
It’s not clear what those unannounced deals are, but that is a significant amount of demand. This isn’t just an Amazon problem — Microsoft CEO Satya Nadella said they also had a huge backlog, but theirs was $392 billion.
The answer to this problem of course is spending buckets of capital expenditure dollars to scale up to meet demand. Amazon spent $35.1 billion on capex last quarter, and said the total for the full year is $125 billion. And next year, management expects it to be bigger than that.
Jassy was asked to talk about the massive layoffs Amazon just announced, cutting 14,000 corporate roles (with a reported 30,000 planned company-wide). Why did the company have to cut so deep when the money is rolling in? It’s not about the money, said Jassy:
“The announcement that we made a few days ago was not really financially driven, and it’s not even really AI driven — not right now, at least. It really, it’s culture. And if you grow as fast as we did for several years, the size of businesses, the number of people, the number of locations, the types of businesses you’re in, you end up with a lot more people than what you had before, and you end up with a lot more layers.”
Jassy explained that all that built-up headcount was slowing management decisions down, and that the company is “committed to operating like the world’s largest startup.”
Update (Friday 11:45 a.m.): Corrected opening price for Amazon.
