By Emily Bary
Investors were worried AWS was falling behind in AI. A new growth trajectory has restored confidence in Amazon’s cloud business.
AWS’s revenue growth saw a major uptick in the third quarter, and analysts see more room for acceleration.
UBS analyst Stephen Ju likened Amazon’s stock to a “coiled spring” ahead of earnings. Now investors are quickly seeing its powerful release.
Amazon’s stock (AMZN) has been bottled up this year, held back by ho-hum cloud growth that raised investor concerns about the competitiveness of AWS, the company’s profit engine. But AWS reignited in the latest quarter, and with more capacity coming online, Wall Street is upbeat about what’s to come.
Amazon’s stock is up more than 11% shortly after Friday’s open.
Evercore ISI analyst Mark Mahaney wrote of an “AWS unlock” as the cloud unit’s 20% year-over-year revenue growth rate in the third quarter was its fastest in 11 quarters. Amazon also cited a 150% sequential boom in revenue from its Trainium custom-chip business, which had been another source of investor doubt before the report.
With those trends in tow, “the AI narrative has flipped positive for AWS,” Mahaney said in a note to clients.
See also: Amazon earnings are out. Here’s why the stock is soaring.
Wedbush’s Scott Devitt also honed in on a “positive narrative shift,” while commenting that Amazon’s executive team appears to have won more credibility.
“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,” he said in a report.
AWS’s growth went from 17.5% in the June quarter to 20.2% in the September quarter and could be 22% in the December quarter, according to Devitt.
“We are encouraged by the implied level of demand in the coming quarters given the pace of backlog growth and a higher [capital-expenditure] guide for 2025,” he wrote. “We think management’s revenue guide suggests a sequential acceleration in AWS growth” in the fourth quarter as well.
Mizuho’s Lloyd Walmsley said management seemed to be “intentionally avoiding the term ‘accelerate,’” but he, too, thinks AWS’s growth rate will pick up in the fourth quarter. His projection for the segment calls for 21% growth.
And Amazon’s stock can move higher as well, Walmsley said, citing a depressed 24x forward price-to-earnings multiple versus the company’s three-year average of 31x.
“Bottom line, we believe shares are set for a meaningful rebound,” he wrote. Amazon’s stock was the worst year-to-date performer in the “Magnificent Seven” heading into earnings, with a roughly 2% gain that also meaningfully lagged the S&P 500’s SPX 17% rise over the same span.
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While AWS gets a lot of attention because of its importance to Amazon’s profits and its perception as a gauge of early AI monetization, analysts saw things to like elsewhere in the technology giant’s business.
Advertising also punches above its weight in terms of its profit impact at Amazon, and that business grew 24% in the quarter, showing a further acceleration from the 23% rate sported in the June quarter.
In thinking about advertising and AWS, Pivotal Research Group’s Jeffrey Wlodarczak said that Amazon “operates two high-margin growthy businesses,” on top of its “massive low-margin logistics business with unmatched scale with the potential to materially juice margins medium to long-term using AI in combination with robotics.”
In retail, Mahaney called out “robust” and “consistent” growth. Retail makes up the lion’s share of Amazon’s revenue even though it’s less profitable than advertising and the cloud.
E-commerce and advertising “are monsters and have strong catalysts near term,” Mizuho trading-desk analyst Jordan Klein added.
With Amazon’s businesses all humming and AWS growth ticking higher, investors seem willing to put up with heightened AI spending: The company now expects $125 billion in capital expenditures for the year, up from $100 billion previously.
See more: Meta’s stock slide erases $215 billion in market value, as Wall Street pans ‘runaway’ AI spending
-Emily Bary
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10-31-25 0951ET
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