Amazon (AMZN) Stock: Soars 13% After Earnings Beat and 20% AWS Growth

TLDR

• Amazon stock jumped 13% in premarket trading after third-quarter earnings beat expectations, with revenue hitting $180.2 billion and EPS of $1.95.
• AWS revenue grew 20% to $33 billion, the fastest growth rate in over a year, surpassing analyst expectations of 18% growth.
• Amazon is investing roughly $100 billion this year in data centers and chip capacity, adding 3.8 gigawatts of power to support cloud infrastructure.
• The company’s custom Trainium2 chips are fully subscribed with nearly 500,000 chips online and expectations for 1 million by year-end.
• Raymond James raised its price target on Amazon from $230 to $275, while other firms including Morgan Stanley set targets as high as $315.

Amazon stock rose more than 13% in premarket trading Friday after third-quarter earnings crushed Wall Street expectations. The e-commerce and cloud giant posted $180.2 billion in revenue and earnings per share of $1.95.

Revenue was up 13% from a year earlier. Profit came in above what analysts expected.

Amazon.com, Inc., AMZN

The stock was poised for a $300 billion market cap rally. If the gain holds through Friday’s session, it would mark Amazon’s strongest day since early 2022.

The real story was AWS. The cloud business grew 20% to $33 billion in revenue.

That was the fastest growth rate in more than a year. Analysts had expected around 18% growth.

For months, investors worried Amazon was falling behind Microsoft and Google in the cloud race. Microsoft’s Azure grew 40% this quarter and Google Cloud jumped 34%.

But the gap narrowed. And 20% was the magic number analysts had been waiting for.

The Infrastructure Play

Amazon didn’t just cut prices or sign bigger contracts. The company went all-in on infrastructure.

This year alone, Amazon has invested roughly $100 billion in data center build-outs and chip capacity. The company added 3.8 gigawatts of power.

That’s the kind of scale that turns a cloud business into something closer to a utility. CEO Andy Jassy said AWS is growing at a pace not seen since 2022.

The company is betting big on its own silicon. Amazon’s custom Trainium2 chips are fully subscribed.

Nearly 500,000 Trainium2 chips are already online. The company expects to hit 1 million chips by year-end.

The chip business is growing 150% quarter over quarter. It’s expected to become a multi-billion dollar segment.

Project Rainier, a cluster of roughly half a million accelerators built for Anthropic, is already under construction. Jassy said AWS increased capacity in the quarter and plans to double capacity by 2027.

Analyst Targets Jump

Wall Street moved fast. Raymond James raised its price target from $230 to $275 while maintaining an Outperform rating.

The firm pointed to AWS exceeding the 20% growth threshold ahead of schedule. That outpaced most buy-side expectations.

Raymond James is watching for increased adoption of Bedrock and Trainium3. The firm believes these could drive tens of billions of dollars in AI cloud revenue.

Morgan Stanley went even higher, setting a price target of $315. Telsey Advisory Group raised its target to $300.

BMO Capital also increased its target to $300, highlighting a 300 basis point sequential acceleration in AWS growth. Citizens and BofA Securities joined the parade with targets of $300 and $303 respectively.

Ethan Feller at Zacks Investment Research called it a “banner” quarter. He said it could be a turning point for investment sentiment.

The quarter might set the stage for Amazon to reclaim a leadership role among large-cap tech stocks heading into year-end. Customer interest in Trainium is rising, according to Jassy on the earnings call.

Amazon’s current price sits at $222.86 with a P/E ratio of 34.27. The PEG ratio stands at 0.58.

Amazon’s overall revenue reached $670 billion in the last twelve months with 10.87% year-over-year growth. Guidance for the holiday quarter was steady to slightly higher.

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