Amazon's stock soars 12% on third-quarter beat and increased spending guidance

Amazon's shares experienced a remarkable 12% increase on Friday after the company announced impressive third-quarter results, exceeding expectations across the board. The tech giant also raised its spending forecast in response to the booming demand for artificial intelligence services. A significant contributor to this success was Amazon Web Services (AWS), which reported a 20% year-over-year increase in sales, reaching $33 billion. This exceeded market predictions and was pivotal in driving both revenue and profit growth. AWS generated an operating income of $11.4 billion, constituting approximately two-thirds of Amazon's overall operating profit. Additionally, revenue from Amazon's digital advertising segment surged by 24%, hitting $17.7 billion. Overall, the company’s total sales rose by 13% to $180.17 billion, surpassing the average analyst estimate of $177.8 billion, as reported by LSEG. Earnings per share also outperformed expectations, coming in at $1.95 compared to the predicted $1.57. Analysts from Pivotal Research highlighted Amazon's strong competitive position, stating that the company holds a significant advantage in its core businesses due to its unmatched scale. They also noted that Amazon has many organic growth opportunities, particularly within the high-margin AWS and advertising sectors. Despite concerns about increased competition in the cloud market from rivals like Google and Microsoft, which reported their own quarterly gains this week—34% and 40% growth in cloud revenue respectively—Amazon remains the leading player in cloud infrastructure technology. The company has been perceived as lagging in capturing lucrative AI deals, but its spending strategy sets it apart from competitors. Amazon has raised its capital expenditure forecast, now anticipating an expenditure of $125 billion in 2025, up from a previous estimate of $118 billion. CFO Brian Olsavsky indicated that this figure might increase in 2026. In comparison, Google, Meta, and Microsoft also raised their capital expenditure guidance, but their figures remain lower than Amazon's. Looking ahead, Amazon projects sales for the current quarter between $206 billion and $213 billion, with the midpoint of $209.5 billion exceeding analyst estimates of $208 billion. While investors are optimistic following these results, the company faces challenges, including the announcement of layoffs affecting 14,000 corporate employees aimed at streamlining operations. CEO Andy Jassy explained that the layoffs are part of an effort to reduce bureaucracy and improve agility, stating that the decision is not driven by financial reasons or AI considerations at this time. The company reported a workforce of approximately 1.58 million at the end of the quarter, reflecting a 2% increase from the same period last year. The core online stores segment also showed growth of 10% for the quarter, factoring in the impact of its Prime Day event held in July.