Amazon CEO Andy Jassy has recently allayed investor concerns regarding the company’s significant investments in generative artificial intelligence.
Speaking during a conference call after the release of Amazon’s third-quarter earnings report, Jassy addressed investors who may be concerned about the company’s substantial investments in generative artificial intelligence. He reassured them about the future returns of these high-cost initiatives.
During the call, the CEO highlighted the success of Amazon Web Services (AWS), the company’s highly profitable cloud computing division, as an example of Amazon’s ability to turn substantial investments into long-term gains.
He said Amazon is using generative AI “pervasively” across its businesses, including AI-powered shopping in parts of Europe, Canada and the United States. The e-commerce giant also recently debuted AI shopping guides for consumers, which help customers to find products, he said, as well as an AI assistant that “offers tailored business insights to boost productivity and drive seller growth.” “The increase bumps here are really driven by generative AI,” Jassy added.
Recall that Amazon reported better-than-expected earnings and revenue for the third quarter, driven by growth in its cloud computing and advertising businesses. Earnings was $1.43 while revenue was $158.88 billion surpassing analysts expectations.
Amazon CEO Jassy noted that the company has shown that it can drive significant operating income and free cash flow, turning this into a successful return on invested capital business. He hinted at a similar trajectory for the company’s generative Al investments.
He said,
“I think we’ve proven over time that we can drive enough operating income and free cash Row to make this a verv successful return on invested capital business. We expect the same thing will happen here with generative AI.”
Amazon’s spending on property and equipment reached $22.6 billion this quarter-a rise of 81% year-over-year. Jassy projected the company’s capital expenditures (capex) would hit $75 billion in 2024, with even higher amounts anticipated for 2025.
This sharp increase in spending is primarily fueled by Amazon’s investments in generative Al, driving the company to expand its data center capacity, networking capabilities, and other infrastructure to support the rapidly growing demand for Al technology.
‘”It’s an exceptionally large, possibly once-in-a-lifetime opportunity,” Jassy remarked. “I think our customers, the business, and our shareholders will appreciate this aggressive pursuit in the long run.”
Notably, the subject of Al spending has been a central topic across recent tech earnings calls. Meta’s CEO, Mark Zuckerberg, raised capital expenditures guidance, expressing satisfaction with progress, while Microsoft cited its partnership with OpenAl as a driver of increased spending. Alphabet CFO Anat Ashkenazi also announced higher capex expectations for 2025. Jassy noted that Amazon’s cloud division has gained substantial business from companies requiring infrastructure for generative Al models.
Amazon has launched various Al products aimed at enterprises, third-party marketplace sellers, and advertisers. The company is also set to unveil a new version of its Alexa voice assistant powered by generative Al, expected “in the near future.” Although Amazon hasn’t disclosed specific revenue figures from generative Al, Jassy revealed that it has become a “multi-billion-dollar revenue run rate” business within AWS, with triple-digit growth year-over-year. “It’s currently expanding at more than three times the rate AWS did at this stage, and AWS itself grew quite rapidly.” he added.
While Amazon hasn’t disclosed specific revenue figures from generative Al, Jassy’s optimistic outlook and the company’s strong financial performance have reassured investors about the future of Al-driven growth. The company said it expects revenue for the fourth quarter to be between $181.5 billion and $188.5 billion, compared with the $186.29 billion forecast by analysts.
