Amazon shares soar as AI demand boosts cloud revenue — and results fire up CEO Andy Jassy

Core Insights - Amazon's cloud revenue experienced a significant increase, marking the fastest growth in nearly three years, which positively influenced the company's quarterly sales forecast and led to a 14% rise in share price during after-market trading [1][3] - The company anticipates higher capital expenditures next year, with full-year capital expenditures expected to reach around $125 billion, primarily driven by AI projects [3][6] Cloud Revenue Performance - Amazon Web Services (AWS) reported a 20% increase in revenue for the third quarter, surpassing estimates of 17.95%, despite a previous outage affecting many popular websites [4][12] - AWS contributes over 15% of Amazon's total revenue but accounts for approximately 60% of the company's total operating income, highlighting its role as a major profit driver [5][13] Market Reaction and Future Outlook - The surge in AWS revenue contributed to an increase in Amazon's market value by about $330 billion, with potential for the largest one-day percentage gain since 2015 if similar performance is seen in regular trading [3] - Amazon projected total net sales for the fourth quarter between $206 billion and $213 billion, slightly above analyst expectations of $208.12 billion [6] AI and Capital Expenditure Trends - The ongoing demand for AI software development is driving significant cloud spending, which is helping to mitigate slower growth in Amazon's e-commerce segment [2][10] - Other major tech companies, including Microsoft and Google, are also increasing their capital expenditures in AI, indicating a broader trend in the industry [9][10] Advertising Revenue Growth - Amazon's advertising sales rose by 24% year-over-year to $17.7 billion, reflecting the company's strategic focus on enhancing ad placements and exploring new advertising avenues [14] Workforce and Operational Changes - The company announced a $1.8 billion charge for severance costs due to a reduction of 14,000 corporate jobs, part of a broader plan that may lead to around 30,000 job losses [15][16] - The workforce reduction is described as a cultural adjustment rather than a financial necessity, aimed at streamlining operations [16]