Now that Amazon (NASDAQ: AMZN) has dominated online shopping, the company is investing heavily in generative artificial intelligence and cloud computing and expects the majority of capital expenditures going forward will be focused on developing AI. In the company’s earnings call following the release of Q1 results, CEO Andy Jassy and CFO Brian Olsavsky spent a significant amount of time on the company’s plans for AI and the expectation to “meaningfully” increase spending on the technology.
“We’re seeing strong demand signals from our customers on the AWS side,” Olsavsky said, adding that “they’re signing longer deals with larger commitments, many with generative AI components.” Olsavsky added that the generative AI business now represents a “multi-billion dollar revenue run rate business for Amazon,” while AWS is expected to grow to $100B in annualized revenue. The unit generated a profit of $9.42B in Q1 with a 37.6% operating margin.
“Eighty-five percent or more of the global IT spend remains on-premises. This is before you even calculate gen AI, most of which will be created over the next 10-20 years from scratch and on the cloud. There’s a very large opportunity in front of us,” Jassy said.
As for the other businesses, Jassy noted that the newer investments like international stores, third-party logistics business offerings such as buy with Prime, Amazon shipping and multi-channel fulfillment continues to show promising growth. The company also said it was launching a smaller Whole Foods market concept in Manhattan called Whole Foods Market Daily Shop.
The ad business saw sales climb an impressive 24% year-over-year driven by sponsored products and supported by continued improvements in relevancy and measurement capabilities for advertisers.
“We still see significant opportunity ahead in our sponsored products, as well as areas where we’re just getting started like Prime Video Ads,” Jassy said. And while it's early for streaming TV ads, Jassy is encouraged by the early response.
