Amazon.com Inc (NASDAQ:AMZN) shares inched up 0.34% to $242.67 in late trading Thursday, outperforming a broader tech sell-off that saw the Nasdaq Composite fall 0.87%. The modest gain came as investors weighed Amazon Web Services' latest push to turn its massive artificial intelligence spending into revenue-generating products, rather than just rising data center costs.
At its AWS Summit in Washington, the company announced a pair of $1 billion initiatives: a generative AI engineer service for clients, and a cloud credit program aimed at U.S. intelligence agencies. The AI engineer pledge represents about 0.7% of AWS's trailing 12-month revenue of $137 billion, and roughly 2.1% of its operating profit over the same period.
Under the program, AWS will deploy Forward Deployed Engineering teams to work directly with customers, sending AI engineers to help integrate the technology into their operations. Francesca Vasquez, AWS vice president of Frontier AI Engineering and Services, said customers want "expert AI engineers working directly with their teams." The company said the new group is already working with clients including the Allen Institute, Cox Automotive, the NBA, Ricoh, Southwest Airlines, and the NFL.
Separately, AWS said it will run a $1 billion cloud incentive program for U.S. Intelligence Community agencies through October 2030, and provide up to $20 million in credits to support classified cloud operations for defense. The moves signal Amazon's strategy to embed AI deeply into customer workflows, protecting margins as competition intensifies.
CEO Andy Jassy noted that AWS just posted its "fastest growth in 15 quarters," with sales up 28% to $37.6 billion in the latest quarter. He also said Amazon's custom chips business has reached a $20 billion revenue run rate. However, the company's free cash flow dropped sharply to $1.2 billion over the trailing 12 months ending March 31, down from $25.9 billion a year earlier, as property and equipment purchases surged $59.3 billion—mostly for AI infrastructure.
Competition in the AI services space heated up Thursday as Microsoft Corp (NASDAQ:MSFT) announced it will launch Microsoft Frontier Company, putting $2.5 billion behind helping customers select and combine AI tools. "Three years ago, when we built Copilot, we made a mistake by binding it to OpenAI models only," Judson Althoff, CEO of Microsoft Commercial Business, told Reuters. The move places Microsoft alongside Palantir Technologies (NASDAQ:PLTR) and AWS in the race to offer hands-on AI adoption services.
Patrick Moorhead, CEO at Moor Insights & Strategy, told Reuters that some large customers worry these frontier labs might use project experience to later compete in sectors like coding and legal. The concern highlights the delicate balance tech giants must strike as they offer AI services while potentially becoming competitors in their customers' industries.
On the retail side, Amazon benefited from strong Prime Day performance. Adobe (NASDAQ:ADBE) data cited by Bloomberg showed U.S. online spending across all retailers reached $26.4 billion during Amazon's June 23-26 Prime Day sale, up 9.3% from a year ago. Amazon does not disclose its own Prime Day sales figures and has said third-party estimates are often inaccurate. Jamil Ghani, vice president of Amazon Prime, called the event the "biggest shopping event of the year exclusively for members."
Market conditions were mixed Thursday. U.S. jobs data missed forecasts, with 57,000 positions added in June versus expectations of 110,000, and chip stocks took a hit. "You can really point the finger at the consolidation in the chips," Bruce Zaro at Granite Wealth Management told Reuters. Adam Sarhan at 50 Park Investments said the weaker jobs print "takes the pressure off the Fed" to hike rates soon. Amazon's outlook for the second quarter, issued in April, projects net sales between $194 billion and $199 billion, with operating income between $20 billion and $24 billion, factoring in Prime Day's contribution.
