As consumers continue to be more cautious, Amazon is looking for gains elsewhere. The e-commerce giant is investing heavily in AI, although that does come at the expense of profit margins.
Shift to cheaper
Now that consumers are more cautious about their spending, sales volumes are stagnant but shoppers are looking for cheaper products. The e-commerce giant is feeling increasing competition from Chinese vendors Temu and Shein, who are specialised in ultra-cheap products. CEO Andy Jassy is now trying to reorganise the logistics network in North America, so that goods are closer to customers and delivery costs are lower. This should enable Amazon to offer cheaper items that would otherwise be unprofitable, trying to tackle his Chinese opponents head-on.
Ad revenue rose 20 % to 12.8 billion dollars (12 billion euros), which is less than the 24 % growth last quarter. However, JPMorgan still calls ads Amazon’s fastest-growing revenue stream – and also one of the most profitable. Margins at Amazon’s lucrative cloud division AWS fell 2 percentage points to 36 %, as the company invested 50 % more (an impressive 16 billion euros) in logistics networks and AI infrastructure such as data centres and chips. AWS revenue rose 19 % to 26.3 billion dollars (24 billion euros).
Overall, net sales rose 10 % to 148 billion dollars (135 billion euros) in the second quarter, accounting for a sharply higher net profit of 13.5 billion dollars. Amazon expects operating income to be between 11.5 and 15 billion dollars in the current third quarter, which is below analysts’ expectations.
