Amazon’s cloud business, Amazon Web Services (AWS), is seeing signs of stabilization with the company announcing new deals. However, the e-commerce giant recognizes that consumers are hesitant to spend as the holiday season approaches. Although Amazon’s third-quarter results were strong, the company warns that its revenue forecast for the holiday quarter may fall short of Wall Street expectations.

Shares in Amazon experienced fluctuations during after-hours trading but ultimately rose by 5%. Despite various challenges, Amazon remains focused on solidifying its position as the world’s largest cloud provider and online retailer.

To strengthen its cloud business, Amazon has made strategic investments in new technologies and services. It recently entered a deal to invest up to $4 billion in Anthropic, a chatbot-maker, to compete with rivals like Google and Microsoft. Additionally, the company has reorganized its delivery network to enhance efficiency and reduce costs.

However, Amazon has faced obstacles such as tight household budgets and businesses closely scrutinizing their cloud spending. In September, the U.S. Federal Trade Commission filed a lawsuit against the company, accusing it of inflating prices and wielding monopoly power. Amazon is currently disputing these claims.

Despite these challenges, Amazon predicts revenue between $160 billion and $167 billion for the holiday quarter, ending on December 31. Analysts’ expectations were slightly higher at $166.62 billion. Analysts believe that the company’s increase in seasonal hires indicates positive consumer spending, at least for now.

The performance of AWS significantly impacts Amazon’s overall success. In recent quarters, AWS has experienced slower growth after years of being a major profit driver. In contrast, Microsoft’s cloud business has surpassed expectations as customers embrace artificial intelligence upgrades.

Amazon stated that efforts to help customers optimize their cloud spending have started to slow down. Nonetheless, CEO Andy Jassy confirmed that AWS is gaining traction and securing deals, including expansions with existing customers and first-time agreements. The company’s CFO, Brian Olsavsky, added that AWS’s growth is stabilizing.

In the third quarter, AWS generated revenue of $23.1 billion, slightly surpassing analysts’ predictions. Overall, Amazon’s revenue increased by 13% to $143.1 billion, surpassing Wall Street estimates. Net income also rose to $9.9 billion from $2.87 billion in the same quarter last year.

While Amazon observed strong demand in categories like beauty and health, consumers remain cautious about prices and are actively seeking deals. The company has managed to reduce transportation costs, offset partially by higher fuel costs.

Several initiatives have contributed to Amazon’s success, including its well-known shopping event, Prime Day, which achieved its highest sales day ever in the third quarter. Additionally, the retailer’s same-day delivery services have encouraged customers to place more frequent and larger orders.

Overall, Amazon’s North America segment reported an 11% increase in sales to nearly $88 billion, with the business in that region recording a $4.3 billion operating profit compared to a loss last year. The company has aggressively cut costs by reducing its workforce and streamlining operations.

Despite the challenges posed by consumers’ cautious spending and external pressures, Amazon remains committed to delivering quality services and maintaining its position as a global leader in cloud computing and retail.

Useful Links:
CNBC: Amazon’s Q3 Earnings Report
Reuters: Amazon’s AWS Growth Stabilizes