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Blistering cloud growth sent Amazon.com shares soaring after its last earnings report. Now that more than half of those gains are gone, the firm needs to deliver a repeat performance to reignite its faltering stock.<\/p>\n
The stock had its best day since 2012 on July 31 after the e-commerce and cloud giant\u2019s second-quarter results showed that revenue at Amazon Web Services, its cloud business, was accelerating faster than Wall Street expected. But the shares have struggled since then, down more than 10% from an early August record, as jitters about the AI trade, pressure from higher interest rates and competition from AI services such as Meta Platforms Inc.\u2019s Muse cut into market sentiment.<\/p>\n
So shareholders are looking for AWS to perform the same trick it did last quarter when Amazon reports its earnings after the bell on Thursday. Analysts expect the segment to post an almost 40% jump in quarterly revenue from last year to $45.7 billion, according to data compiled by Bloomberg.<\/p>\n
\u201cA year ago, investors would\u2019ve doubted that they could do that,\u201d said Jed Ellerbroek, a portfolio manager at Argent Capital Management, which holds Amazon shares. \u201cI think we\u2019re going to see excellent results from AWS.\u201d<\/p>\n<\/p>\n
Amazon\u2019s report comes during a packed week for hyperscaler results, with investors increasingly focused on seeing tangible payoffs from heavy spending to build the infrastructure for artificial intelligence. Anthropic PBC\u2019s filing for an initial public offering on Monday helped assuage some fears about the health of the AI trade and the amount of debt being raised to finance it, which has weighed on technology shares in recent weeks.<\/p>\n
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es in their earnings reports late Wednesday. Alphabet\u2019s stock plunged 13% Thursday as Google\u2019s parent posted third-quarter profits and sales that missed analysts\u2019 estimates, while Microsoft fell 1.1% after the company reported better-than-anticipated cloud revenue.<\/p>\n
Amazon shares were down 3.9% on Thursday afternoon as scepticism about the AI trade took hold after Alphabet\u2019s earnings.<\/p>\n
Wall Street is expecting a solid quarter from Amazon, with revenue climbing 12% to $202 billion and net income rising 2% to almost $22 billion. Beyond AWS\u2019s performance, investors will be closely watching the company\u2019s capital expenditures. Amazon raised its capex forecast last quarter, mostly due to high memory prices, and investors likely won\u2019t be surprised if it increases its spending outlook again. Analysts\u2019 capex estimates have risen to about $222 billion for 2026 and nearly $290 billion for 2027.<\/p>\n
\u201cWe have to understand where the spending plateaus and how durable it is,\u201d said Jake Behan, head of capital markets at Direxion, adding that it needs to happen while AWS\u2019s revenue expansion is accelerating \u201cfrom high to higher.\u201d<\/p>\n
How Amazon gets to that AI spending figure may matter more to the stock price than the actual quarterly results, according to Evercore ISI analyst Mark Mahaney. Meta\u2019s strong earnings last week were overshadowed by its funding needs, as investors are increasingly concerned about capex hurting free cash flow and about whether companies are using equity or debt to fund their AI build-outs. Amazon is expected to have negative free cash flow this year and next.<\/p>\n
\u201cIntensifying competition for AI capital is also raising the odds of equity issuance at scale,\u201d Mahaney wrote in an Oct. 23 note. \u201cWe would not draw a straight line from Meta to Amazon, as we view Amazon as better positioned than most to fund its AI buildout (relying on debt rather than equity)\u201d<\/p>\n
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The rosy reaction to Anthropic\u2019s IPO filing also could benefit Amazon, as the company\u2019s stake in the AI lab has boosted profits in recent quarters. The offering could value Anthropic at as much as $1.75 trillion, and according to calculations by Oppenheimer & Co. analyst Jason Helfstein, each $1 trillion of market capitalisation will add about 7% to Amazon\u2019s market value, which currently stands at about $2.7 trillion.<\/p>\n
Anthropic\u2019s IPO \u201cwould provide more disclosure around compute demand for cloud providers, such as the estimated $111 billion committed to AWS,\u201d he wrote in a research note last week.<\/p>\n
What Amazon says about its remaining performance obligations and how close it is to collecting on those contracts is also important. Amazon had a backlog of nearly $500 billion in the second quarter.<\/p>\n
\u201cWe have to understand if Amazon is supply constrained on that backlog; we\u2019ve seen that elsewhere,\u201d Direxion\u2019s Behan said. \u201cHow monetizable is that backlog?\u201d<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
#Amazons #ailing #stock #booming #cloud #growth #revive #rally<\/p>\n","protected":false},"excerpt":{"rendered":"
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