Amazon's AWS posts fastest growth since 2021, citing AI and chip demand

Amazon Web Services (AWS), a subsidiary of Amazon, reported the strongest growth in cloud computing services since 2021 in the second quarter. The digital commerce giant's revenue from AWS surged 37%, reaching $42.23 billion, surpassing analysts' expectations. AWS's growth rate accelerated from 28% in the first quarter. The company's artificial intelligence (AI) business and chip units each generated over $25 billion in annualized revenue, more than doubling from the previous year.

Amazon remains the dominant player in cloud computing, with Microsoft's Azure and other cloud services growing 43%, compared to 40% in the March quarter. Alphabet's Google Cloud also saw an impressive 82% increase in revenue, reaching almost $25 billion in the quarter. AWS reported a robust $16.62 billion in operating income during the second quarter, exceeding the $13.62 billion consensus.

The subsidiary's 36.8% operating margin for the period was higher than Google Cloud's 35.6%. Nearly 61% of Amazon's overall operating profit now comes from AWS. The company's capital expenditures increased to $54.21 billion, a 68% rise and surpassing the $49.35 billion consensus. AWS has been actively expanding its infrastructure to meet the increasing demand for AI chips from customers, investing heavily in data centers.

The company plans to host OpenAI models and will supply Meta with hundreds of thousands of its Graviton chips over a three-year deal.