Amazon rises 11% after profit beat on AWS rebound, AI-fueled growth

Investing.com - Amazon posted stronger-than-expected quarterly earnings powered by rapid growth in its cloud unit and surging artificial intelligence demand, sending its shares up more than 11% in early trading Friday. 

The e-commerce giant reported third-quarter earnings per share of $1.95, beating analysts’ estimates of $1.56.

Revenue rose 13% to $180.2 billion, above expectations of $177.75 billion.

Sales at Amazon Web Services (AWS), its largest profit driver, climbed 20% to $33 billion. The company said it was at its fastest pace since 2022 as AI workloads boosted cloud demand. 

In the previous quarter, AWS grew 17.5%, which was slower than what the market had hoped. 

CEO Andy Jassy said AWS is “re-accelerating” and expanding capacity rapidly, including 3.8 gigawatts added in the past year.

"Despite playing a bit of catch up, AWS has secured significant AI capacity over the next several years," Barclays analyst Ross Sandler said in a note.

"We expect growth to accelerate from here," they added.

Truist Securities analyst Youssef Squali said Amazon "is investing aggressively in AI and is building out capacity to satiate the significant demand it’s currently seeing, which should help sustain 20%+ growth at AWS."

"We see Amazon as one of the best plays on the secular growth of c-commerce, cloud, and advertising, all at a compelling valuation."

Amazon’s operating income held steady at $17.4 billion in the quarter, but the figure includes $4.3 billion in one-time charges from an FTC settlement and severance costs.

Excluding these, operating income would have risen to $21.7 billion. Net income rose to $21.2 billion from $15.3 billion a year earlier, helped by a $9.5 billion gain from its investment in Anthropic.

North America sales grew 11% to $106.3 billion, while international sales rose 14% to $40.9 billion. The company’s free cash flow fell to $14.8 billion due to heavier capital spending.

Amazon said it expects fourth-quarter revenue between $206 billion and $213 billion, implying growth of 10% to 13%, broadly in line with Wall Street forecasts. It projected operating income of $21 billion to $26 billion.

Jassy said AI is driving “meaningful improvements” across the company, highlighting strong adoption of Amazon’s Trainium2 chips and new products such as Quick Suite, an AI agent platform designed to speed up workplace tasks.

(Pratyush Thakur contributed to this report.)