Amazon.com is expected to join Google and Microsoft on Thursday in reporting a surge in capital spending on artificial intelligence as Big Tech companies rush to capitalize on the booming technology.
The e-commerce giant’s capital investments — mostly for building cloud and generative AI infrastructure — is expected to have risen 43% in the second quarter to $16.41 billion, according to LSEG data. That represents a roughly $1.5 billion increase from the previous three months.
The steep spending is also expected to pressure Amazon’s margins, outweighing benefits from cost cuts and supply chain efficiencies that are aiding the retail unit’s profitability.
The company’s Amazon Web Services (AWS) business has long dominated the cloud-computing market but it has been facing tough competition from Microsoft in recent quarters after the Windows maker rolled out AI-powered services to its Azure cloud business.
In response, Amazon has partnered with the likes of Anthropic and offered startups free credits that cover the cost of using major AI models to boost the market share of its AI platform Bedrock. It also named a new head for the AWS unit in May.
Microsoft and Google-parent Alphabet also said earlier this month they would plow ahead with investments even as the payoff from AI takes longer than some investors had hoped. This knocked Big Tech stocks whose valuations have soared this year on the promise of AI.
“Amazon’s capex spend will certainly be scrutinized closely. It has been slow on the adoption of AI and is skewed towards smaller companies which have struggled in the high interest-rate environment,” said Ben Barringer, analyst at Quilter Cheviot.
“We would expect AWS to start speeding things up in its AI development going forward.”
Amazon shares have risen about 23% this year. The stock has shed more than 6% since July 8, when it hit a record, part of a broader market selloff led by U.S. megacaps.
Growth at AWS is likely to have stayed similar to the previous quarter at just over 17%, according to LSEG data. But, Morgan Stanley analysts said: “AWS needs to grow 18%+ in order to … ensure investors of AWS’s (AI) positioning and its ability to generate high-teens growth through this heavy capex investment period.”
As a result of the spending increase, Amazon’s gross profit margin growth is expected to have slowed to 1.3% in the April-June quarter, compared with 2.6% in the previous quarter and an average of 2.7% over the past two years.
Growth in its North American retail business likely slowed to 8% between April and June, from 12.3% in the January-March quarter, amid signs of a wider slowdown in consumer spending and some competition from new and fast-growing Chinese players such as Temu and Tiktok Shop that are enticing more U.S. shoppers.
Amazon’s total revenue is expected to have grown 10.6% to $148.56 billion — the slowest rise in five quarters.
—Deborah Mary Sophia, Reuters
Accedi per aggiungere un commento
Altri post in questo gruppo
When Donald Trump returned to the White House in 2025, many in the tech world hoped his promises to champion artificial intelligence and cut regulation would outweigh the risks of his famously vol
The first 27 satellites for Amazon’s Kuiper broadband internet constellation were launched into space from Florid
There are so many ways to die. You could fall off a cliff. A monk could light you on fire. A bat the size of a yacht could kick your head in. You’ve only just begun the game, and yet here you are,
Former Tinder CEO Renate Nyborg launched Meeno less than two years ago with the intention of it being an AI chatbot that help
The most indelible image from Donald Trump’s inauguration in January is not the image of the president taking the oath of office without his hand on the Bible. It is not the image of the First Lad
Ernest Hemingway had an influential theory about fiction that might explain a lot about a p
The first 100 days of Trump’s second presidential term have included a surprising player that doesn’t seem likely to go away anytime soon: Signal.
The encrypted messaging pl
