TLDR
- Amazon shares climbed 13% in premarket trading after Q3 earnings topped forecasts with $180.2 billion revenue and $1.95 EPS.
- AWS posted 20% revenue growth to $33 billion, exceeding analyst estimates and marking the fastest expansion in over a year.
- The company is spending $100 billion on data centers and chips this year, with Trainium2 chips fully subscribed and 500,000 units online.
- Raymond James lifted its price target to $275 while Morgan Stanley raised its target to $315 following the earnings report.
- AWS plans to double capacity by 2027 as the chip business grows 150% quarter over quarter.
Amazon stock surged 13% in premarket trading Friday following third-quarter results that crushed Wall Street expectations. The company reported $180.2 billion in revenue and earnings per share of $1.95.
Revenue jumped 13% year over year. The results beat analyst forecasts across the board.
The stock was tracking toward a $300 billion market cap gain. If sustained through Friday’s close, it would represent Amazon’s best single-day performance since early 2022.
AWS was the star of the show. The cloud division generated $33 billion in revenue with 20% growth.
That marks the fastest expansion rate in more than a year. Analysts had projected roughly 18% growth.
Investors had spent months questioning whether Amazon could compete with Microsoft and Google. Azure grew 40% this quarter while Google Cloud expanded 34%.
But the 20% figure was what Wall Street wanted to see. The gap is narrowing.
Big Bets on Infrastructure
Amazon took a different approach than competitors. Instead of just competing on price, the company invested heavily in physical infrastructure.
The tech giant is pouring approximately $100 billion into data centers and chip capacity this year. Amazon added 3.8 gigawatts of power to support the expansion.
CEO Andy Jassy said AWS is growing at a pace not witnessed since 2022. The company increased capacity during the quarter.
Amazon plans to double AWS capacity by 2027. Customer demand for Trainium chips is rising.
The custom Trainium2 chips are fully subscribed. Nearly 500,000 units are currently operational with expectations to reach 1 million by year-end.
This chip business is expanding 150% quarter over quarter. Analysts expect it to become a multi-billion dollar revenue stream.
Wall Street Raises Targets
Raymond James increased its price target from $230 to $275 while keeping an Outperform rating. The firm noted AWS beat the critical 20% growth threshold ahead of schedule.
The analyst pointed to Trainium2 adoption progressing faster than expected. Raymond James sees potential for tens of billions in AI cloud revenue.
Morgan Stanley went further with a $315 price target. Telsey Advisory Group and BMO Capital both set $300 targets.
Citizens raised its target to $300 citing results that exceeded guidance. BofA Securities lifted its target to $303.
Ethan Feller at Zacks Investment Research called the quarter a potential turning point. He believes Amazon could reclaim its leadership position among large-cap tech stocks.
Recent Trading Data
Amazon currently trades at $222.86 with a price-to-earnings ratio of 34.27. The PEG ratio stands at 0.58.
Trailing twelve-month revenue reached $670 billion with 10.87% year-over-year growth. Holiday quarter guidance came in steady to slightly higher than expectations.
Project Rainier, featuring roughly half a million accelerators for Anthropic, is under construction. The company continues to expand its custom silicon lineup to support cloud operations.
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