Cloud revenue is sending Amazon shares soaring. Here’s what analysts had to say

Amazon reported a strong third-quarter earnings beat, with EPS of $1.95 on $180.27 billion in revenue, significantly exceeding analyst estimates. A key highlight was the reacceleration of its AWS cloud unit, which grew 20.2% to $33 billion, surpassing expectations due to robust artificial intelligence demand and its custom Trainium chips. Following the report, Amazon's shares surged 13%, prompting Wall Street analysts to raise price targets and maintain bullish outlooks, citing AWS's renewed growth momentum and strong AI-driven demand as critical drivers for future performance.

Analysis

Amazon reported a robust third-quarter performance, significantly exceeding analyst expectations with EPS of $1.95 on $180.27 billion in revenue, compared to LSEG estimates of $1.57 EPS and $177.8 billion revenue. A pivotal highlight was the reacceleration of its Amazon Web Services (AWS) cloud unit, which grew 20.2% to $33 billion, surpassing StreetAccount's $32.42 billion estimate and marking its fastest growth pace since 2022, largely driven by strong artificial intelligence (AI) demand.

Following this strong report, Amazon's shares surged 13%, prompting widespread bullish sentiment from Wall Street analysts, including Goldman Sachs, Barclays, Bank of America, JPMorgan, UBS, Morgan Stanley, and Citi. These firms maintained or raised their price targets, implying significant upside ranging from 30% to 44%, underscoring confidence in AWS's renewed momentum and strategic positioning in the AI sector.

Analysts specifically lauded Amazon's custom Trainium chips for AI training, noting strong demand and its role in securing substantial AI capacity, with Anthropic reportedly training Claude on a significant number of Trainium2 chips. This, coupled with the availability of NVIDIA's Grace Blackwell chips within AWS, is seen as validating Amazon's full-stack AI approach and dispelling prior concerns about its AI hardware capabilities, further strengthening the long-term growth narrative for AWS and the company overall.

Key Decisions for Investors

• Consider maintaining or increasing exposure to AMZN, given the strong earnings beat, reaccelerating AWS growth driven by robust AI demand, and widespread analyst bullishness.
• Monitor AWS's continued growth trajectory and the adoption rate of its custom AI silicon (Trainium) as key indicators for sustained performance and competitive advantage.
• Evaluate the impact of the broader consumer environment on Amazon's retail segment in upcoming quarters, as investor debates may shift focus to consumer behavior despite current e-commerce strength.