Good morning. Amazon's market cap exceeded $2 trillion for the first time on Wednesday, as its CFO is betting big on AI use—both for potential clients and internally.
Amazon shares this year are up nearly 30%—and over the previous 12 months up almost 50%. Earlier in 2024, Alphabet's market cap hit $2 trillion, but both firms still trail Microsoft, Apple, and Nvidia, all of which are worth more than $3 trillion. (Bank of America just raised its price target for Amazon shares to $220 from $210.)
“We believe Amazon is starting to join the AI party, and the Street is taking notice with $2 trillion now cleared and the road to $3 trillion underway,” Dan Ives, managing partner at Wedbush Securities, told me on Thursday. “Amazon is just getting onto the dance floor.”
However, on Thursday, Amazon CFO Brian Olsavsky didn’t post on LinkedIn about joining the $2 trillion market cap club—instead he commented on the annual meeting of the company's Finance and Global Business Services (FGBS) unit. FGBS consists of several corporate teams such as accounting, corporate FP&A, and finance operations.
“We heard about fraud prevention, generative AI tools that are improving controllership, forecasting, and more,” Olsavsky writes. “Presenters demonstrated how they work relentlessly to deliver results, invent and simplify, and create better, innovative experiences for our customers.”
Amazon (no. 2 in the Fortune 500) under CEO Andy Jassy has finally hit an inflection point where it can both invest heavily in long-term bets like generative AI while at the same time produce significant profits, Fortune’s Jason Del Rey recently reported. In April, Amazon reported Q1 2024 earnings with revenue of $143.3 billion, up 13% year over year and $10 billion in profit.
Amazon Web Services (AWS) revenue in Q1 was $25 billion, an increase of 17% year over year. AWS is now a $100 billion annualized revenue run rate business, Olsavsky said on the April earnings call.
In the first quarter, “we saw growth in both generative AI and non-generative AI workloads across a diverse group of customers—and across industries—as companies are shifting their focus toward driving innovation and bringing new workloads to the cloud,” he said. Amazon is continuing to see strong demand for AWS, and launched Amazon Q, a generative AI-powered assistant.
Olsavsky, CFO since 2015 and a 22-year Amazon veteran, said during the April earnings call the company remains focused on driving efficiencies across the business to invest in AWS momentum, including generative AI. He added that it's still “relatively early days in generative AI and more broadly, the cloud space, and we see sizable opportunities for growth.”
Amazon has been cutting costs and restructuring its business to invest in AI in the long term. From November 2022 to March 2023, Amazon conducted multiple rounds of layoffs, cutting a total of 27,000 employees. In May, the company laid off more than 100 customer service managers working in Level 5 and Level 6 middle management positions both at call centers and virtually, Del Rey reported. Amazon divisions such as AWS, Prime Video, and Twitch have all cut hundreds of employees this year.
Have a good weekend.
Sheryl Estrada
sheryl.estrada@fortune.com
