The world’s largest online retailer has had another outstanding quarter. Amazon’s exceptionally strong Q3 results demonstrate the success of its diversified business model and its ongoing push into artificial intelligence and cloud infrastructure.
Revenue increased 12% year-on-year to $180.2 billion, exceeding analyst expectations of $177.8 billion. Net income climbed to $21.2 billion, boosted by a $9.5 billion gain from its investment in AI startup Anthropic. Earnings per share came in at $1.95, ahead of the $1.57 forecast.
Amazon’s advertising division also delivered strong results, with revenue up 22% to $17.7 billion, reflecting the company’s growing influence in retail media.
Investing in the future
Although expenditure this year hit $34 billion, with full-year guidance raised to $125 billion, as the company spent heavily on AI infrastructure projects, including custom-built chips and expanded data centre capacity, this investment will be powering next-generation services. Amazon Web Services (AWS) continues to be the linchpin of Amazon’s success, generating $33 billion in Q3 revenue, up 20% year-on-year. Amazon’s President and CEO Andy Jassy said: “AWS is growing at a pace we haven’t seen since 2022.”
AWS provides cloud infrastructure and services to millions of businesses globally, including Netflix, Airbnb, Spotify, Marks & Spencer, NASA, and Capital One. These organisations rely on AWS for scalable computing, secure data storage, AI tools, and advanced analytics – as indeed was demonstrated during the AWS outage earlier in October, which caused widespread disruption across the digital economy.
Leading the way with Gen AI
Already, Amazon is leading the way when it comes to Generative AI. Amazon’s AI shopping assistant Rufus has been used by 250 million customers this year, with data suggesting Rufus users are 60% more likely to complete purchases. Gen AI tools for sellers have been adopted by 1.3 million independent merchants – reinforcing Amazon’s strategy to embed AI across its ecosystem, and justifying its significant investment in doing so.
But such a significant investment has hit Amazon’s free cash flow, which dropped sharply – from $47.7 billion a year ago to $14.8 billion. That decline shows just how much Amazon is spending on infrastructure to support future growth, which could limit flexibility in the short term. The company has also had to absorb $4.3 billion in costs tied to an FTC settlement and severance payouts. Nonetheless, it still posted a strong operating income of $17.4 billion.
Looking ahead, Amazon expects Q4 revenue of $206–$213 billion, up 10–13% year-on-year, and operating income between $21–$26 billion. While its current concern may be cash flow, it’s betting heavily that the short-term expense of its AI investments will pay off in the long term. The ability to absorb these costs and still keep profits strong is testimony to Amazon’s scale and staying power.
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