Amazon.com reported higher-than-expected revenue from Amazon Web Services in its third-quarter earnings on Thursday, showing sustained momentum in its cloud computing business.
Amazon Web Services brought in $46 billion in revenue for the three months through September, accounting for 39% growth year-over-year, the company said.
Overall revenue increased 12% to $201.9 billion, and net income was $20.7 billion. Both were below analysts' estimates polled by FactSet.
Shares of Amazon dropped more than 5% in after-hours trading.
Spending on artificial intellligence is top of mind for big tech investors. Amazon has said it is planning to spend $220 billion on capital expenditures this year, largely to build AI data centers.
Amazon shares gained more than 9% after its July earnings call, when Chief Executive Andy Jassy disclosed the company would spend an additional $20 billion on top of the $200 billion already announced. He attributed part of the increase to the higher cost of memory.
"We've long believed AWS could become a few-hundred-billion-dollar-revenue business, and now believe it'll be at least double that -- and very possibly be a trillion-dollar annual revenue business for us in time," Jassy said in July.
Meta Platforms last week said it would create a new class of nonvoting stock to fund its investments in AI.
Larry Fink, the chairman and CEO of BlackRock, penned an op-ed in The Wall Street Journal this month arguing that America is in a high-stakes competition for capital.
"Companies with the deepest pockets have an obvious advantage. Those are the hyperscalers," he wrote. "The goal should be to finance their growth without starving the rest of the economy of capital."
Data centers, often a physical conduit for fears about the AI revolution, have become a political flashpoint ahead of the midterm elections. Politicians who once championed AI data centers have changed their tune.
Pennsylvania Gov. Josh Shapiro signed an executive order in August imposing strict guardrails on new data center projects. President Trump recently said he is requiring companies that build large data centers in the U.S. to provide their own electricity and suggested they pay communities hosting facilities a dividend.
Amazon earlier this month made a new public relations appeal to shore up support for its data centers. The cloud-computing giant published a memorandum calling the fight for AI dominance "the race our nation can't afford to lose"and promised to invest more than $1 billion over the next five years into data center communities.
In its marquee e-commerce business, Amazon also recently got into a tiff with Meta Platforms over its new AI assistant, Muse. People can use Muse to book travel, budget and shop online. Amazon blocked Muse from shopping on its site shortly after Muse's September launch, citing safety concerns.
"We think it's fairly straightforward that third-party applications that offer to make purchases on behalf of customers from other businesses should operate openly and respect service provider decisions about whether or not to participate," an Amazon spokesperson said at the time.
More than 10 million people in the U.S. and Canada have downloaded the Muse app, Meta Chief Executive Mark Zuckerberg said on the company's earnings call. Meanwhile, Amazon's rivals including Walmart and Shopify have embraced Muse, cutting deals with Meta.
"Amazon's decision to block Meta's Muse highlights an emerging debate over ownership of the customer relationship and advertising economics," Deutsche Bank said in a recent report.
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