Amazon Bets Big on Cloud and AI to Offset Retail Slowdown

Amazon is set to report its Q2 2023 earnings on Thursday, and the tech giant is expected to reassure investors that its cloud business, Amazon Web Services (AWS), is growing rapidly enough to offset any potential pullback in consumer spending that could impact its retail operations.

Amazon's overall revenue is likely to have increased 9.5% in Q2 2023 to $162.08 billion, with AWS, which accounts for less than a fifth of the company's sales but around 60% of its profits, projected to have grown 17% during the April-June period. The company, along with rivals like Alphabet and Microsoft, has been investing heavily to expand its data center capacity to meet the growing demand for cloud services, including the surge in generative AI.

While AWS and Microsoft's Azure remain the dominant cloud providers, Google has recently secured some high-profile deals, including one with OpenAI, sparking concerns that it could be taking market share from AWS. This could prompt Amazon to increase its own capital expenditures to stay competitive.

Despite the challenges posed by tariffs and trade deals, Amazon's e-commerce business has so far weathered the storm well, with sellers continuing to prefer the platform for its low prices, convenience, and product selection. The company has also been working to keep prices as low as possible for its third-party sellers.