The competition in cloud business among technology giants has become a focus of attention in the capital market. On October 27th, Amazon released its financial report for the third quarter of 2023.
The financial report shows that Amazon's net sales increased by 13% to $143.1 billion in the third quarter of 2023, exceeding analysts' previous expectations. Among them, the sales of the North American division increased by 11% year-on-year to $87.9 billion, and the international business sales increased by 16% year-on-year to $32.1 billion. International business has resumed growth, with sales growth of only 1% in the first quarter of this year. Amazon's core business AWS achieved net sales of $23.1 billion in the third quarter, a year-on-year increase of 12%, which is consistent with the growth rate in the second quarter. This is also the lowest growth rate of Amazon's cloud computing business since 2014, with a growth rate of 16% in the first quarter.
In terms of net profit, Amazon's net profit in the third quarter was $9.9 billion, compared to $2.9 billion in the third quarter of 2022, a year-on-year increase of 241%. Due to better than expected revenue and profits, Amazon's stock price rose by over 5% to $125.55 after hours.
One of the reasons for the rapid profit growth in the third quarter is that Amazon's pre tax valuation profit on its investment in electric vehicle Rivian Automotive common stock reached $1.2 billion. From last year to the first quarter of 2023, Amazon's investment in Rivian was at a loss. Amazon had a net loss of $2.7 billion in 2022, with a pre tax valuation loss of $12.7 billion on its investment in Rivian Automotive common stock.
Rivian's stock price has been continuously declining since January 2022, with a 79% drop from its initial offering price of $78. However, Amazon is still optimistic about the development of electric vehicles and plans to put 100000 Rivian electric delivery vehicles on the road by 2030.
In addition to the positive return on investment in Rivian, Amazon's retail business also improved in the third quarter, with the North American and International divisions performing well in the third quarter. The North American division had a revenue of $4.3 billion in the third quarter, compared to an operating loss of $400 million in the same period last year. The operating loss of the international division in the third quarter narrowed from a loss of $2.5 billion in the same period last year to a loss of $100 million.
Amazon CEO Andy Jassy said, "Our performance in the third quarter was strong as the service costs and delivery speed of our retail business took another step forward, shifting from a single national distribution network in the United States to eight different regions, allowing us to provide Prime customers with the fastest delivery speed in 29 years of history
From the trend of stock price performance, after experiencing a continuous decline in stock prices in the second half of last year, Amazon's stock price gradually rose in the first half of this year. However, since September, Amazon's stock price has once again declined. Amazon has experienced multiple challenges this year, including regulatory and market competition. As of the close of the US stock market on October 26th, Amazon's stock price fell 1.5% to $119.57.
In an uncertain macro context, global companies are reducing spending on cloud and IT infrastructure projects, and competition in cloud computing business is becoming more intense. In terms of cloud business performance of other technology companies, Microsoft's intelligent cloud department's revenue in the third quarter was $24.3 billion, a year-on-year increase of 19%, and the growth rate has recovered. Google's cloud business grew at 22.5% in the third quarter, slowing down and also lower than market expectations.
In addition, Amazon still faces a monopoly investigation. In late September, the Federal Trade Commission and 17 state attorneys general filed a lawsuit against Amazon, accusing it of using its "monopoly power" to raise prices, lower the quality of shoppers, and illegally exclude competitors, thereby disrupting competition. Amazon countered in October by claiming that the Federal Trade Commission had filed a misleading lawsuit against Amazon, which, if successful, would force Amazon to take actions that actually harm consumers and businesses.
In the fourth quarter, Amazon's e-commerce business will face a crucial battle. There were several major promotions in the fourth quarter, including Black Friday, Cyber Day, and Christmas season promotions. Amazon previously announced the time of this year's Black Five event: Black Five events in the US and European regions will be held from November 17th to November 27th. Amazon also encourages brand sellers to participate in Amazon's brand attraction reward program, etc.
This year's Black Friday is TikTokShop's first major promotion after fully launching e-commerce business in the US region. TikTokShop plans to offer 50% subsidy discounts to merchants in Black Friday to attract them to participate in the promotion event.
In addition to TikTokShop offering substantial discounts, Wal Mart, a retail giant, also launched new functions this year to provide distribution services for sellers' large goods, and also launched tools to support sellers' businesses to better cope with online competition.
In addition, Amazon has made new progress in unmanned delivery services recently. On October 18th, Amazon announced the launch of its new robotics system Sequoia to improve its ability to identify and store inventory. On the same day, Amazon announced that customers in University Town, Texas could choose to deliver drugs through drones.