Revenue at Amazon Web Services, the focus of the company’s recent AI investments, rose 20% in the third quarter. While Microsoft Azure grew revenue by 40% and Google Cloud grew by 34%, AWS’s massive scale magnifies the impact on growth.
Its cloud revenues of $33 billion are more than double Google’s $15.16 billion.
Wall Street cheered AWS’s comeback, with analysts noting that the gains marked a potential turning point for Amazon.
“There was certainly concern that AWS would lose market share to Microsoft Azure and Google Cloud… But now AWS is also on the bandwagon and they are seeing a big increase in revenue,” said Jed Ellerbroek, portfolio manager at Argent Capital.
Ellerbroek said investors expected an AWS boost in the fourth quarter or early next year. “But it’s already happening this quarter,” he said.AMAZON OVERTAKES APPLE AND TESLA WITH YEAR TO DATE PROFITUntil Friday’s stock surge, Amazon shares had risen just 1.6% so far this year due to market share concerns and a lack of solid AI updates, leaving the company the worst performer in the “Magnificent Seven” group of tech giants.
However, Friday’s gains help Amazon pull out of that position and overtake Tesla and Apple. The EV company is up about 11% this year, including session-to-date moves, while Apple is up about 8%.
Amazon CEO Andy Jassy said Thursday that AWS is “growing at a pace we haven’t seen since 2022,” thanks to strong demand for AI and core infrastructure.
In response to growing demand, Amazon, like other Big Tech companies, forecast an increase in capital expenditures for the coming year.
“Amazon delivered one of the strongest performances of this earnings season, dispelling any doubts about its ability to execute at scale,” said eToro market analyst Farhan Badami.
Amazon’s trailing twelve-month price-to-earnings ratio is 29.63, surpassing Alphabet’s 25.98, but lagging behind Microsoft’s 31.72.
RETAIL, ADVERTISING SHOWS STRONG
The company’s retail and advertising businesses also delivered robust performance.
“Amazon’s retail results have been very good. They are growing 11% year over year. Name me another major retailer in America that is growing that fast: they don’t exist,” says Jed Ellerbroek of Argent Capital.
Although it makes up a smaller portion of Amazon’s overall business, the advertising segment is growing rapidly. Revenue at the company rose 24% to $17.7 billion in the quarter, thanks to the company’s efforts to expand ad placements on its Echo devices, shopping carts and sponsored ads.
At least 23 brokerages raised their price targets for Amazon stock following the results.
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