Amazon Q2 2024 Earnings: CEO Jassy 'Very Bullish On' AI In Long Run

AWS capabilities around “operational performance and security … and a deeper partner ecosystem” remain differentiators in the cloud race, Amazon.com CEO Andy Jassy said.

Amazon Web Services partners, and Amazon itself, are seeing increased work around preparing customer data for artificial intelligence – which will also drive growth in the vendor’s cloud business, though AI remains a long-term opportunity instead of an immediate revenue driver.

These are some of the big takeaways from the second fiscal quarter earnings of AWS’ Seattle-based parent Amazon.com, President and CEO Andy Jassy told analysts on the call – which covered the three months ended June 30.

Illustrating how even preparing data for AI use is a commitment, Jassy said that “when we work with customers – and this is true both when we work directly with customers as well as when we work with systems integrator partners – everyone's in a hurry to get going on doing generative AI and one of the first questions that we ask is, ‘Show us where your data is. Show us what your data lake looks like. Show us how you're going to access that data.’”

Amazon Q2 2024 Earnings

AWS has more than 130,000 partners worldwide, according to CRN’s 2024 Channel Chiefs.

Much of Amazon’s AI growth has been with companies who already have their data in the cloud, Jassy said.

And estimating that 90 percent of IT spend is still on-premises, “the ability to use AI more effectively is going to be one of the many drivers” for migrating to the cloud, the CEO said.

Amazon AI A Long-Term Play

Jassy told analysts on the call that he remains “very bullish on the medium- to long-term impact of AI and every business we know and can imagine,” although Amazon’s AI business is already at “a multibillion dollar revenue run rate.”

He shared some examples of how Amazon.com is leveraging AI in its e-commerce business, including AI-powered shopping assistant Rufus, a simulation feature for customers trying out apparel and a “Project Private Investigator” effort that uses AI and computer vision to find defects before products go to customers.

“Companies have to build muscle around the best way to solve actual customer problems,” Jassy said. “But we see so much potential. … We are investing a lot across the board in AI and we'll keep doing so as we like what we're seeing and what we see ahead of us.”

On the cost of AI – a common area of scrutiny for vendors that even came up during AWS AI and cloud rival Microsoft’s quarterly earnings this week – Jassy said that Amazon has learned to manage capacity and increasing capacity for AWS and that AI customers usually provide enough signal before changing capacity.

“While the models are more fluid, it's also true that we've built, I think, a lot of muscle and skill over time in building these capacity signals and models,” Jassy said. “While we're investing a significant amount in the AI space and in infrastructure, we would like to have more capacity than we already have today. I mean, we have a lot of demand right now and I think it's going to be a very, very large business.”

Amazon Custom Silicon

Updating analysts on the call on Amazon’s custom silicon business, Jassy said that the generalized central processing unit (CPU) offering Graviton “has been very successful for customers and for our AWS businesses.”

“It saves customers about up to about 30 to 40 percent price performance versus the other leading x86 processors that they could use,” he said.

Amazon still has “a very deep partnership with Intel on the generalized CPU space,” Jassy said, but the vendor is finding better price performance in its custom offering.

“A lot of times, it's hard to get that price performance from existing players unless you decide to optimize yourself from what you're learning from your customers, you push that envelope yourself,” he said.

Scarcity of graphics processing units has led to Amazon developing the Trainium training chip and Inferentia inference chip, Jassy said. He predicted that the GPUs will “have a very good return profile just like Graviton” and “be another differentiating feature around AWS relative to others.”

“They will have very compelling relative price performance,” he said. “And in a world where it's hard to get GPUs today – the supply is scarce and all the schedules continue to move over time – customers are quite excited and demanding at a high clip our custom silicon. And we're producing it as fast as we can.”

Customer Buying Behavior

Jassy told analysts on the call that business technology buying behavior has mostly returned to normal since the pandemic, saying that “we have seen the lion's share of the cost optimization happen.” Customers are returning to investment in the cloud instead of running their own data centers.

And AWS capabilities around “operational performance and security … and a deeper partner ecosystem” remain differentiators in the cloud race, Jassy said.

“Pre-pandemic, we were on this march where most companies were trying to figure out how to modernize their infrastructure, which really means moving from on-premises to the cloud because they can save money and invent more quickly and get better developer productivity,” Jassy said. AWS “continues to be the partner of choice as people are moving to the cloud.”

AI will help grow the cloud business, the CEO said. “In the generative AI space, it's going to get big fast, and it's largely all going to be built from the get-go in the cloud.”

Q2 In Detail And Guidance

In the second quarter, AWS brought in $26.3 billion, an increase of 19 percent year over year not counting foreign exchange.

AWS has an annualized revenue run rate (ARR) of more than $105 billion, Amazon.com CFO Brian Olsavsky said on the call. The vendor “saw continued growth across both generative AI and non generative AI workloads” and “saw companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premises to the cloud and tap into the power of generative AI.”

AWS’ operating income was $9.3 billion, up about 70 percent year over year. Amazon.com’s stock fell about 4 percent after hours, trading at $176.20 a share.

As AI industry watchers continue to scrutinize growing vendor spending on the emerging technology, Olsavsky told analysts on the call that he expects capital investments to grow in the second half of 2024.

“The majority of the spend will be to support the growing need for AWS infrastructure as we continue to see strong demand in both generative AI and our non-generative AI workloads,” he said.