Amazon shares surged more than 13 per cent in premarket trading on Friday after strong growth at its cloud unit and a bullish sales outlook eased fears that the tech giant was falling behind rivals in the AI race.
Revenue at Amazon Web Services, the hub of the company's recent AI investments, rose 20 per cent in the third quarter. Although Microsoft Azure's revenue increased by 40 per cent and Google Cloud's by 34 per cent, AWS's sheer scale magnifies its growth impact.
Its $33 billion cloud revenue is more than double that of Google's $15.16 billion.
Wall Street cheered AWS's comeback, with analysts noting the earnings marked a potential turning point for Amazon.
"There was definitely concern about AWS losing market share to Microsoft Azure and Google Cloud... But now AWS is aboard the train as well and they're seeing a big revenue increase", said Jed Ellerbroek, portfolio manager at Argent Capital.
Ellerbroek said investors were expecting an AWS boost in the fourth quarter or early next year. "But it's already come this quarter", he said.
Up until Friday's stock surge, Amazon shares had risen just 1.6 per cent so far this year due to market share worries and a lack of solid AI updates, making the company the worst performer in the "Magnificent Seven" group of tech giants.
If premarket gains hold, Amazon will overtake Tesla and Apple on the list. The EV company has climbed about 9 per cent this year, with Apple up roughly 8 per cent. Both stocks are up less than 2 per cent in premarket trading.
Amazon CEO Andy Jassy said on Thursday AWS is "growing at a pace we haven't seen since 2022", on the back of strong demand for AI and core infrastructure. — Reuters
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