Amazon crushed its quarterly earnings report on Thursday evening, increasing its market cap by more than $100 billion overnight – and it did so with a major assist from its advertising business.
Amazon Advertising generated $10.7 billion in revenue in Q2, up from $8.7 billion a year ago.
“Our performance-based advertising offerings continue to be the largest contributor to our growth,” Amazon CFO Brian Olsavsky told investors in his prepared remarks.
Amazon’s consistent advertising gains – quarter over quarter and year over year – stand out even more strongly when one considers that many other online and streaming ads businesses are down.
Although they appear to have turned the corner, even Google and Meta struggled to maintain near-flat ad revenue over the past year.
Addressing the ‘unaddressable’
But similar to Google and Meta, however, Amazon has been investing big into AI, including to support its advertising business.
In its earnings release, Amazon noted that its ad businesses created machine learning models last quarter that help advertisers reach “previously unaddressable audiences” from around the web.
“The new machine learning models analyze a range of signals to help advertisers predict and reach highly relevant audiences with optimal cost-efficiency, which is critical to reaching desired audiences as the advertising industry moves away from third-party cookies,” according to the release.
This marks the first time that the term “third-party cookies” appears in an Amazon company earnings filing.
But it’s the machine learning-related part of that sentence that investors are most interested in right now. For the first time since 2021, when Amazon began disclosing its ad revenue – and despite the strong quarter in ad revenue – Amazon Advertising didn’t come up once during the Q&A with investors on the Q2 call.
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Practically every question was about generative AI and the potential integration of AI chat services or content creation into Amazon’s products. The same dynamic played out during Google’s most recent earnings call in July .
While “ads” or “advertising” came up exactly zero times during the back and forth with investors, a quick review of the call transcript shows 24 references to “generative AI” by an investor or by the Amazon chiefs themselves.
And Amazon is well-placed to win on the AI front, regardless of the early accomplishments of ChatGPT-maker OpenAI, which is built on Microsoft Azure.
“Remember, the core of AI is data,” said Amazon CEO Andy Jassy, making the case for why Amazon will be a strong player across AI services considering its access to a wide range of first-party data and the data services it offers through AWS.
“People want to bring generative AI models to the data,” he said, “not the other way around.”
