SEATTLE – Amazon.com Inc (AMZN.O) reported a 13% rise in third-quarter revenue on Thursday, handily beating expectations as its cloud-computing division re-accelerated on the back of soaring demand for artificial intelligence services.
The robust sales growth, however, was tempered by a pair of special charges that held operating income flat. The company also issued a fourth-quarter sales forecast that was largely in line with analyst projections.
Net sales climbed to $180.2 billion for the quarter ended September 30, up from $158.9 billion a year earlier. The company’s crown jewel, Amazon Web Services (AWS), saw sales surge 20% year-over-year to $33.0 billion, a pace of growth not seen since 2022.
“We continue to see strong momentum and growth across Amazon as AI drives meaningful improvements in every corner of our business,” said Amazon CEO Andy Jassy. “AWS is growing at a pace we haven’t seen since 2022, re-accelerating to 20.2% YoY.”
The strong top-line performance was overshadowed by $4.3 billion in special charges. These included a $2.5 billion legal settlement with the U.S. Federal Trade Commission and $1.8 billion in severance costs tied to planned job cuts. These charges pinned operating income at $17.4 billion, identical to the year-ago quarter. Excluding these items, operating income would have been $21.7 billion.
Net income, however, soared to $21.2 billion, or $1.95 per diluted share, compared with $15.3 billion, or $1.43 per share, in the third quarter of 2024. The bottom line was significantly boosted by a pre-tax gain of $9.5 billion from the company’s investments in AI startup Anthropic.
AI Drives Cloud and Consumer Divisions
The quarter underscored Amazon’s aggressive bet on AI. Jassy highlighted that the company has added more than 3.8 gigawatts of power capacity in the past 12 months to support AI data centers, “more than any other cloud provider.”
Amazon also launched “Project Rainier,” a massive AI compute cluster containing nearly 500,000 of its custom Trainium2 chips, which Jassy said is now a “multi-billion-dollar business” that grew 150% quarter-over-quarter.
The AI push extended beyond the cloud. In its core e-commerce business, the company said 250 million customers have used its Rufus AI shopping assistant this year, with those shoppers 60% more likely to make a purchase. The company also continues to roll out an upgraded, paid version of its Alexa voice assistant, Alexa+, which it says drives significantly higher engagement.
Segment Performance and Outlook
- North America sales rose 11% to $106.3 billion, but segment operating income fell to $4.8 billion, weighed down by the FTC settlement.
- International sales increased 14% to $40.9 billion.
- AWS operating income jumped to $11.4 billion, up from $10.4 billion a year ago, demonstrating its high profitability.
For the critical fourth quarter, which includes the holiday season, Amazon forecast net sales between $206.0 billion and $213.0 billion, representing growth of 10% to 13%. This was largely in line with analyst estimates.
The company expects operating income for the quarter to be between $21.0 billion and $26.0 billion, compared with $21.2 billion a year earlier.
Despite the strong sales, a note of caution was seen in free cash flow, which decreased to $14.8 billion for the trailing twelve months, driven by a significant increase in capital expenditures for infrastructure and equipment.
Other Highlights
The company announced a series of new AWS agreements with major firms including Delta Air Lines (DAL.N), Volkswagen (VOWG_p.DE), and Fox Corporation (FOXA.O). Its advertising business also expanded partnerships, allowing brands to buy ad space on platforms like Netflix (NFLX.O) and Spotify (SPOT.N).
In entertainment, the third season of “The Summer I Turned Pretty” drew over 70 million global viewers, and the company’s “Thursday Night Football” broadcasts on Prime Video averaged 15.3 million viewers, a 16% increase over the previous season.