On Thursday, Amazon (AMZN) stock experienced a significant surge after the tech giant released its third-quarter earnings, which surpassed Wall Street expectations. The results highlighted a robust performance from Amazon's cloud business, a critical revenue driver that has shown the sales growth acceleration investors have been eagerly anticipating.
Amazon reported an adjusted earnings per share of $1.95 for the quarter ending in September, marking a remarkable 33% increase compared to the same period last year. This figure notably exceeded the analysts' forecast of $1.57, as per data from FactSet. Additionally, the company saw a 13% increase in sales, totaling $180.2 billion, which also surpassed the expected $177.91 billion.
A key highlight of the earnings report was the performance of Amazon's AWS cloud business. AWS sales grew by 20%, amounting to $33 billion, outpacing the anticipated $32.4 billion and representing an 18.1% growth rate. This resurgence in AWS growth is particularly significant as analysts have been closely monitoring when AWS might reaccelerate beyond the 20% growth threshold. Many were not forecasting this level of growth until after 2026, according to FactSet insights.
In a news release, Chief Executive Andy Jassy stated, "We continue to see strong momentum and growth across Amazon as AI drives meaningful improvements in every corner of our business." He emphasized that AWS is experiencing growth rates reminiscent of 2022 and noted the strong demand for AI and core infrastructure. Jassy also mentioned that the company has focused on accelerating its capacity, having added more than 3.8 gigawatts of infrastructure in the past year.
The strong AWS results may help alleviate investor concerns regarding Amazon's competitive position in the cloud market, especially in light of Microsoft (MSFT) and Google parent Alphabet (GOOGL) making gains driven by AI advancements. These concerns have contributed to the pressure on Amazon's stock this year.
Looking ahead, Amazon projected sales of $209.5 billion for the crucial December-ending quarter, with an expected operating income of $23.5 billion at the midpoint of its guidance range. Prior to the earnings report, analysts had estimated Q4 revenue to be around $208.41 billion and operating income at $23.8 billion.
Following the release of the earnings report, Amazon's stock price surged by over 10% in after-hours trading, reaching $246.71. This rise came after a 2% decline during regular trading hours, leaving shares up only 2.2% year to date, significantly lagging behind the S&P 500's 16% rally.
Before the earnings announcement, Amazon shares were forming a cup base with a buy point set at $238.85, according to the IBD MarketSurge tool. The IBD Stock Checkup indicates that Amazon holds an IBD Composite Rating of 89 out of a maximum 99, a score that combines five separate proprietary ratings. Typically, the best growth stocks boast a Composite Rating of 90 or higher.
In related market news, Meta stock experienced a decline following its earnings report, and there is growing anxiety on Wall Street regarding the costs associated with AI 'superintelligence.' Investors are encouraged to explore top growth stocks to buy and watch, as well as strategies to time the market effectively using IBD's ETF Market Strategy. For those interested in long-term investments, IBD's Long-Term Leaders can provide valuable insights.
