Amazon stock (AMZN) cloud business is worth more than most of the S&P 500

Amazon (AMZN) stock surged Friday after the e-commerce giant’s impressive third-quarter earnings report reaffirmed its cloud leadership.

The company reported earnings of $1.43 per share on revenue of $158.9 billion, significantly beating Wall Street forecasts.

AWS generated $27.45 billion in revenue for the quarter, contributing to a staggering $103 billion in revenue over the past 12 months.

Macro strategist Charlie Bilello highlighted that AWS’s annual sales surpassed the revenue of 468 companies in the S&P 500, meaning AWS alone outpaces nearly 94% of the index’s firms.

Year-over-year, AWS revenue climbed 13.2%, with two-year growth reaching 28.6%, and an impressive 65.6% increase since 2021.

These figures underscore why Amazon leads the global cloud market.

According to Statista, AWS holds 31% of global cloud market share, surpassing the combined share of competitors like Google, Alibaba, Oracle, Salesforce, IBM, and Tencent.

Amazon’s rising profitability is another key strength, with its operating margin reaching 11% in the third quarter, topping estimates.

This growth comes even as the company invests heavily in AI, a high-cost sector still in its early stages.

According to Amazon CEO Andy Jassy, the AI segment now has a “multibillion-dollar revenue run rate,” justifying Amazon’s substantial 81% increase in capital expenditures.

“Our customers, the business, and our shareholders will appreciate that we’re pursuing this aggressively,” Jassy said during the earnings call.

“We’ve proven we can drive operating income and free cash flow, making this a high-return-on-invested-capital business. We expect the same with generative AI, which we see as an extraordinarily large, potentially once-in-a-lifetime opportunity,” Jassy added.

AMZN stock outperforms

AMZN stock jumped 6.2% on Nov. 1, closing at $197.93.

Year-to-date, the stock is up over 31%, outpacing the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite.

Goldman Sachs analysts see another 24% upside for AMZN from here, with analyst Eric Sheridan upping his price target to $240 after the company’s strong earnings report.

“AWS benefits from a structural growth opportunity, driven by evolving enterprise needs and generative AI tailwinds,” Sheridan commented.

JPM Securities analyst Nicholas Jones is even more optimistic, raising his AMZN price target by $20 to $285, suggesting a 45% upside.

Jones noted that “demand for AI is continuing to drive strong AWS trends,” alongside Amazon’s solid tech and e-commerce businesses.