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Amazon (Nasdaq: AMZN) recently announced its second-quarter results that missed market expectations on revenue. Its stock tumbled on its revenue miss and weak outlook.

Amazon’s Financials

Amazon’s second quarter revenues grew 10% to $148 billion, missing analyst estimates of $148.56 billion. Net income increased to $13.5 billion or $1.26 per share, compared with net income of $6.7 billion, or $0.65 per share a year ago. Analysts estimated EPS of $1.03 per share.

By segment, Net Product sales grew 4% to $61.6 billion and Net Service sales grew 15% to $86.4 billion.

Revenues from Amazon Web Services (AWS) increased 19% to $26.3 billion beating analyst estimates of $26 billion. Advertising services revenue grew 20% to $12.77 billion, missing analyst estimates of $13 billion. 

Online stores revenue grew 5% to $55.4 billion. Subscription services revenues grew 10% to $10.9 billion. Physical stores revenue grew 4% to $5.2 billion. Revenue from third party sellers grew 12% to $36.2 billion.

North American sales grew 9% to $90 billion, while international sales grew 7% to $31.66 billion.

Amazon expects third quarter revenues of $154-$158.5 billion or a growth 8% to 11%. Analysts estimate revenues of $158.24 billion.

Amazon’s AI Business

During the recent earnings call, Amazon CEO Andy Jassy said that its AI business continues to grow dramatically with a multibillion-dollar revenue run rate. AWS has a three-layer GenAI stack: custom training chips, a managed service called Bedrock, and applications like a coding companion called Amazon Q and shopping assistant called Rufus. 

At the bottom layer, it is seeing great demand for the second version of its custom chips Trainium and Inferentia due to their compelling price performance.

At the middle layer, Bedrock, available since September 2023, is a managed service for building and scaling GenAI applications. Bedrock has a large selection of models and makes it easy to switch between different model types and model sizes. Bedrock has recently added Anthropic Claude 3.5 models, Meta’s new Llama 3.1 models, and Mistral’s new Large 2 models. 

At the application or top layer, the company continues to see strong adoption of generative AI-powered coding assistant Amazon Q. Q has the highest known score and acceptance rate for code suggestions and catching security vulnerabilities. Q has helped Amazon migrate over 30,000 Java JDK applications in a few months, saving the company $260 million and 4,500 developer years.

Its stock is trading at $170.1 with a market capitalization of $1.79 trillion. It touched a 52-week high of $201.2 in July. It had fallen to a 52-week low of $118.35 in October last year.

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