Dive Brief:
- Amazon is among big tech companies planning to double down on artificial intelligence spending this year after seeing strong results in the first quarter.
- Amazon’s net sales increased 13% to $143.3 billion in the first quarter, compared with $127.4 billion in the year earlier period, according to results released Tuesday. Amazon Web Services, the company’s cloud computing business, saw its sales rise 17% year-over-year to $25 billion. During a Tuesday earnings call, top executives partially attributed the growth to recent investments in AI.
- “We're seeing strong AWS demand in both generative AI and our non-generative AI workloads, with customers signing up for longer deals, making bigger commitments,” Amazon CFO Brian Olsavsky said during the call. He said the company expects its overall capital expenditures to “meaningfully increase year-over-year in 2024, primarily driven by higher infrastructure CapEx to support growth in AWS, including generative AI.”
Dive Insight:
Amazon’s AWS sales growth surpassed analysts’ expectations, giving the company a stock bump in early Wednesday morning trading, according to Investor’s Business Daily.
The proportion of S&P 500 companies mentioning AI on earnings calls rose to 36% in the fourth quarter of last year, an all-time high, Goldman Sachs analysts wrote in a February research note, as previously reported by CFO Dive.
The report highlighted several companies, including Microsoft, Amazon, and IBM, that were expecting AI to produce results such as enhanced productivity, reduced costs, and improved product offerings.
Meanwhile, a Grant Thornton survey unveiled in January found that AI topped the list of areas cited by tech CFOs as technology-related investment priorities for 2024.
Amazon is the latest tech giant in recent weeks to get rewarded by Wall Street after delivering revenue gains in the wake of hefty AI investments.
Shares of both Microsoft and Alphabet rose last Friday, a day after releasing strong earnings reports. Microsoft said it generated a total of $61.9 billion during the quarter ending March 31, an increase of 17% year over year. Alphabet’s revenues reached $80.5 billion, up 15% over the year-earlier period.
Meta, by contrast, saw its shares fall 10% on Thursday, a day after the company reported weak revenue guidance, coupled with a plan to hike AI spending in 2024 to between $35 billion to $40 billion.
The Meta sell-off shows that investors are closely watching to see if big tech companies are spending wisely when it comes to AI, according to analysts.
“Meta’s earnings should serve as a stark warning for companies reporting this earnings season,” Thomas Monteiro, senior analyst at Investing.com, said in a report last week. “Even though the company did beat estimates in all top and bottom-line metrics, it didn’t matter as much as the reported lowering revenue expectations for Q2.”
