Amazon (AMZN) stock surged Friday after the tech behemoth reported stronger-than-expected third-quarter results. A strong performance from Amazon’s cloud business helped answer a major concern from investors about the company falling behind in the race to offer AI computing power.
Amazon said late Thursday that it earned an adjusted $1.95 per share for the September-ended quarter, up 33% from a year earlier. That easily beat the $1.57 that analysts polled by FactSet were forecasting, though the bottom line was helped by recognizing $9.5 billion in pretax gains from Amazon’s investments in Anthropic. Sales increased 13% to 180.2 billion, compared with analyst estimates of $177.91 billion.
Amazon’s closely watched AWS cloud business grew sales 20% to $33 billion. Analysts were looking for $32.4 billion in sales, representing 18.1% growth.
“We continue to see strong momentum and growth across Amazon as AI drives meaningful improvements in every corner of our business,” Chief Executive Andy Jassy said in a news release. “AWS is growing at a pace we haven’t seen since 2022. We continue to see strong demand in AI and core infrastructure, and we’ve been focused on accelerating capacity – adding more than 3.8 gigawatts in the past 12 months.”
The AWS results could help ease investor concerns that AWS is losing its market-leading cloud position because of AI-driven gains by Microsoft (MSFT) and Google parent Alphabet (GOOGL). Those fears have weighed on shares this year. Amazon stock closed Thursday ahead just 2.2% year to date, significantly underperforming a 16% rally for the S&P 500.
“The 20% growth was earlier than the bulls were even hoping for — thus the stock should show significant relief,” RBC Capital analyst Brad Erickson said in a client note late Thursday.
On the stock market today, Amazon stock rose more than 10% to 246.22. Shares broke out above a 238.85 flat base buy point, according to IBD MarketSurge.
Amazon Q3 By The Numbers
Amazon guided for sales of $209.5 billion for the important December-ending quarter, based on the midpoint of its range. The company expects operation income of $23.5 billion at the midpoint of its range. Prior to the company posting results, analysts were projecting Q4 revenue of $208.4 billion and operating income of $23.8 billion.
Q3 sales for Amazon’s retail-focused North America segment increased 11% year-over-year to $106.3 billion, ahead of estimates for $105 billion. While concerns about tariffs hurt Amazon stock earlier this year, the term never came up as the company’s leaders addressed analyst on conference call Thursday.
Jassy touted the company’s biggest-ever Prime Day deals event, held in July.
Amazon’s advertising revenue increased 23.5% to $17.7 billion, accelerating from 22.9% growth a quarter earlier.
Operating income across Amazon’s retail, cloud and international segments was flat from a year earlier at $17.4 billion. The company said a $2.5 billion settlement with the FTC over how it advertised Prime memberships, as well as severance costs from recent layoffs lowered its operating income. Outside of those charges, operation income would have increased 25% to $21.7 billion the company said. Amazon announced layoffs for 14,000 employees earlier this week.
Amazon Stock: AI Push In Focus
The focus among investors was clearly the Amazon’s AI efforts. Amazon Web Services is by far the market leader for cloud services. But Microsoft Azure and Google Cloud have been growing faster and had seen more progress is accelerating their cloud revenue growth in recent quarters.
AI is driving more cloud spending and both Amazon rivals have some potential AI advantages. Google is developing its own Gemini AI models while Microsoft is partnered-up with ChatGPT creator OpenAI.
Amazon stock sank in late July following the company’s Q2 results, which one analyst called a “mixed print and an even tougher conference call.” Jassy was criticized at the time for not more clearly rebutting concerns about AWS and its AI capabilities.
On Thursday’s call, Jassy stressed the AWS has “more services and deeper features within those services than anybody else.” He expects Amazon will be a leader in helping enterprises adopt AI agents.
Amazon has doubled AWS capacity, as measured by power requirements, since 2022, Jassy said. He expects the company is on track to double capacity again by 2027.
And Jassy pushed back against the revenue growth comparisons for AWS to rivals such as Microsoft, Google and Oracle (ORCL).
“It’s worth remembering that year-over-year percentage growth is a relative term,” Jassy told analysts Thursday. “It’s very different having 20% year-over-year growth on a $132 billion annualized run rate and to
have a higher percentage growth rate on a meaningfully smaller annual revenue, which is the case with our competitors.”
Amazon Raises Data Center Spending Estimate
Jassy also pointed to the company’s partnership with Anthropic, a top rival to OpenAI. Earlier this week AWS launched its “Project Rainier” data center that will train Anthropic’s Claude AI models. It features more than 500,000 of Amazon’s customer Trainium2 chips.
Of course, the AI push comes at a cost. Amazon raised its 2025 full-year capital expenditures guidance to $125 billion, compared with a previous $100 billion. The company expects to spend more next year, CFO Brian Olsavsky told analysts.
Amazon’s free cash flow on a trailing twelve month basis decreased 69% to $14.8 billion. Rising free-cash-flow as Jassy reined in costs in 2023 and last year was a key part of what helped Amazon rally back a 2022 slump.
But analysts expect investors are optimistic enough about AI to shrug off its steep costs for cloud providers.
“While capex landed at $35.1 billion in the quarter and ahead of the Street at $32 billion, we do not believe that investors will hold back on underwriting incremental investments given the aforementioned AWS acceleration,” UBS analyst Stephen Ju wrote Thursday. He reiterated a buy call and upped his price target to 310 from 279.
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