Amazon.com Inc (NASDAQ:AMZN) shares surged almost 11% to about $246 after a third quarter earnings beat, with analysts at Oppenheimer and Wedbush highlighting Amazon Web Services (AWS) and AI initiatives as key growth drivers.
Following the report, Oppenheimer raised its 12 to 18-month price target to $290, maintaining an 'Outperform' rating, citing accelerating AWS revenue growth.
The firm noted that AWS revenue grew 20% year-over-year in Q3, up from 17% in Q2, and described the segment as “gaining momentum.”
Oppenheimer highlighted that Amazon added 3.8 gigawatts (GW) of capacity over the past 12 months, on track to double by 2027, with more than 1 GW coming online in Q4.
The analysts project Q4 AWS revenue growth of 22%, noting that this estimate is conservative given the scale of new capacity.
They also pointed to Amazon’s strong overall performance, with total and operating profit of 9% and 7% respectively, above internal and Street estimates, excluding one-time items.
Advertising revenue grew 22% ex-FX, consistent with Q2, and AWS backlog reached $200 billion, with October deals larger than all Q3 deals combined.
Wedbush also raised its price target on 'Outperform'-rated Amazon to $330, highlighted AWS growth and broader positive trends across Amazon’s business.
“AWS accounts for just ~45% of the implied value of the overall business in our sum-of-the-parts (SOTP) analysis, and there is considerable value in the other core segments of the company that we believe has been overlooked in recent periods,” they believe.
“We are encouraged by the implied level of demand in the coming quarters given the pace of backlog growth and a higher capex guide for 2025,” the analysts wrote.
Wedbush also highlighted growth in online retail and advertising.
Online stores revenue of $67.4 billion was up 9.8% year-over-year, ahead of consensus by about 1%. “Notably, Amazon's AI-powered shopping assistant, Rufus, is on track to deliver $10 billion of incremental annualized sales this year,” Wedbush wrote.
Advertising revenue rose 23.5% year-over-year to $17.7 billion, exceeding estimates by about 260 basis points.
Looking ahead, Wedbush sees Amazon’s Q4 guidance of revenue growth in the range of 10% to 13% year-over-year, versus the Street estimate of 11%, as “encouraging.”
“We expect there is some conservatism embedded in management’s outlook, as the company has outperformed the high end of its guide for several consecutive quarters,” the analysts wrote.
“Following a reacceleration in AWS growth and positive commentary this quarter, we believe investors have regained comfort in management's ability to retain a leading position in the AI space.”