Amazon.com, Inc.

(NASDAQ Global Select)
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Slightly Bullish +25

Amazon's stock drops - even in the face of a bold new cloud forecast

AI integration Cloud expansion Earnings report AI-generated analysis

πŸ“‰ Shares of Amazon fell nearly 7% in after-hours trading as Q3 revenue and earnings missed Wall Street expectations.

πŸ’° Total revenue grew 12% year-over-year to $201.9 billion, slightly below the $202.2 billion analyst consensus.

πŸ“ˆ AWS achieved 39.3% growth with a $184 billion annualized run rate, beating the 38% consensus growth forecast.

πŸš€ CEO Andy Jassy forecasted AWS revenue growth of 40% annually for 2027 and 2028, targeting a $1 trillion business valuation.

⚑ AWS is installing AI accelerators every 14 seconds as demand for processing power continues to rise significantly.

πŸ’Ύ The cloud platform's backlog has increased to $578 billion reflecting sustained high demand for its services.

πŸ”§ Custom-chip business growth is accelerating with revenue commitments for Graviton and Trainium chips up over 20 times.

πŸ“’ Advertising revenue grew only 12% this quarter, missing the 18% forecast due to Prime Day timing shifts.

πŸ€– Amazon reported that its Alexa for Shopping AI agent was used by over 400 million customers in the past 12 months.

πŸ›‘ The company blocked Meta's Muse agent from accessing its platform while defending against external AI disruption narratives.

Bullish Signals
  • AWS grew 39.3% year-over-year, exceeding Wall Street consensus and achieving a $184 billion annualized revenue run rate.
  • Management provided a rare multi-year forecast projecting 40% annual AWS growth for 2027 and 2028, signaling strong long-term confidence.
  • The company's backlog has surged to $578 billion, indicating robust demand for its cloud infrastructure services.
  • Custom-chip revenue commitments for Graviton and Trainium chips have increased over 20 times year-over-year, highlighting rapid adoption.
  • CEO Andy Jassy positioned AWS to become a $1 trillion business within five to 10 years with its current trajectory.
Risk Factors
  • Overall Q3 revenue and earnings per share fell short of Wall Street expectations, causing shares to drop nearly 7% in after-hours trading.
  • Advertising growth slowed to 12%, missing the 18% forecasted by analysts due to Prime Day occurring outside the third quarter.
  • AWS growth of 39.3% was viewed as modest by institutional investors who were expecting a 40%-plus benchmark for the cloud segment.
Full Analysis
Amazon's stock fell nearly 7% in after-hours trading following its third-quarter earnings report, as overall revenue and earnings missed Wall Street expectations. Total revenue grew 12% year-over-year to $201.9 billion, falling short of the $202.2 billion consensus, while earnings per share of $1.89 came in below the anticipated $1.97. Despite modest results in other segments, Amazon provided a bold long-term forecast for its cloud business, AWS. CEO Andy Jassy projected that AWS will grow revenue by 40% annually in both 2027 and 2028, positioning it to become a $1 trillion business within five to 10 years. This multi-year outlook was viewed as a significant bright spot by analysts. AWS delivered strong performance with 39.3% growth and an annualized revenue run rate of $184 billion, exceeding the consensus growth estimate. The company highlighted rapid AI adoption, installing AI accelerators every 14 seconds, and reported a backlog rising to $578 billion. Custom-chip revenue commitments for Graviton and Trainium chips have increased over 20 times year-over-year. Other business areas faced headwinds, with advertising growth slowing to 12% compared to the 18% forecast due to Prime Day shifting to the second quarter. Amazon also addressed concerns about external AI agents, noting that its own Alexa for Shopping was used by over 400 million customers while blocking Meta's agent from accessing its platform.