AWS revenue increased 20% in the quarter.
Amazon (NASDAQ:AMZN) stock was on fire Friday, rising more than 10% on the strength of an excellent third quarter earnings report.
Amazon topped revenue and earnings estimates, posting double-digit gains with Amazon Web Services (AWS), its cloud computing business, leading the way.
- Net sales: $180.2B, up 13% year-over-year. This bested Wall Street estimates of $177.8B.
- Net income: $21.2B, up 38% year-over-year.
- Earnings: $1.95 per share, up 36% year-over-year. This topped estimates of $1.57 per share.
Amazon is the market leader in its two businesses, ecommerce and cloud computing. The ecommerce side of the house saw revenue gains both in North America and internationally. In North America, revenue increased 11% to $106.3 billion. However, profits were down 14% to $4.8 billion. This was mainly due to a $2.5 billion charge related to a legal settlement with the Federal Trade Commission.
International ecommerce revenue jumped 14% year-over-year to $40.9 billion, but it also saw a dip in earnings. Operating income fell 8% to $1.2 billion. This was due to 15% higher expenses, primarily related to severance costs for planned role eliminations.
In late October, the company announced that it was laying off some 14,000 mostly corporate workers due to organizational changes. In 2026, there will be more layoffs, along with hiring in key strategic areas.
AWS to the rescue
Most of Amazon’s profit in the quarter came from AWS, as it typically does. In Q3, AWS saw revenue increase 20% to $33 billion. Further, AWS operating income rose about 10% to $11.4 billion.
The reason that net income rose 38%, in addition to the AWS gains, was a $9.5 billion profit in non-operating income. This was related to its investments in Anthropic PBC, a company that focuses on AI research and safety. Amazon is a minority owner of Anthropic, a company it first invested in about two years ago.
AWS is growing at a pace we haven’t seen since 2022, re-accelerating to 20.2% YoY. 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,” Andy Jassy, president and CEO of Amazon, said.
Looking ahead, Amazon expects net sales of between $206 billion and $213 billion in Q4, which would be 10% and 13% growth compared with fourth quarter of 2024. Operating income is targeted to be between $21 billion and $26 billion, which would be up at the midpoint from $21.2 billion Q4 2024.
Amazon stock got several upgrades from Wall Street, with Telsey, RBC and TD Cowen all boosting their targets to $300 per share, among others. Amazon is currently trading at $247 per share, so that would suggest significant upside.
Amazon stock is up 12% year-to-date, and it is not ridiculously overvalued, trading at 33 times earnings and 28 times forward earnings. It’s hard not to like Amazon at that valuation, given its steady growth.
