Amazon is expecting its cloud business to generate sales of $110 billion in 2024.

Amazon Web Services (AWS) had a strong Q3 of 2024 with $27.5bn in sales, up 19.1 percent year-over-year (YoY).

The segment's operating income was $10.4 billion, compared with $7bn in the same quarter in 2023, while operating expenses were $17bn, up from $16bn last year.

During the earnings call on October 31, CEO Andy Jassy said that the company's artificial intelligence (AI) efforts are paying off and that, in the last 18 months, AWS has released "nearly twice as many machine learning and gen AI features as the other leading cloud providers combined."

Jassy added: "AWS's AI business is a multibillion-dollar revenue run rate business that continues to grow at a triple-digit year-over-year percentage and is growing more than three times faster at this stage of its evolution as AWS itself grew, and we felt like AWS grew pretty quickly."

He also acknowledged that customers are calling for a better price performance on AI workloads, and said that this is why they are investing in their own custom silicon. Tranium2, the second version of AWS' training chip, is set to "ramp up in the next few weeks" and is expected to deliver a better price performance.

The company's capex remains high, with CFO Brian Olsavsky predicting $75 billion in capex for the whole year with the majority of that spend going to "technology infrastructure."

For comparison, 2023 had a capex of $48.4bn.

Jassy added that this is expected to be more in 2025, and that "the majority of it is for AWS and, specifically, the increased bumps here are really driven by generative AI."

Purchases of property and equipment for the quarter were $22.6bn, up from $12.48bn the previous year, though this extends across the entire company.

Olsavsky said AWS' strong operating margin of 38 percent is due to three factors: the increase in sever life that was implemented in 2024, and cost control surrounding "hiring and staffing," noting that its office staff is slightly down year over year. Jassy added that the operating margin has increased in the long term partly due to the company's management of logistics and capacity.

"One of the least understood parts about AWS, over time, is that it is a massive logistics challenge. If you think about it, we have 35 or so regions around the world, which is an area of the world where we have multiple data centers, and then probably about 130 availability zones to data centers, and then we have thousands of SKUs we have to land in all those facilities," said Jassy.

"And if you land too little of them, you end up with shortages, which end up in outages for customers. So, most don't end up with too little, they end up with too much. And if you end up with too much, the economics are woefully inefficient."

In response, Jassy said that AWS has developed "sophisticated models in anticipating capacity needs."

Fellow hyperscalers Google and Microsoft also released their quarterly earnings this week. The companies saw cloud revenues of $11.4bn and $38.9bn, respectively - though Microsoft's cloud revenue is not solely related to its Azure cloud and includes other offerings.