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- Amazon’s AWS business, leveraging NVIDIA GPUs and custom AI chips, drives high profitability and productivity gains, supporting strong investment potential despite eCommerce risks.
- AWS’s vertically integrated AI ecosystem and GenAI productivity improvements enhance margins, with AWS contributing significantly to Amazon’s operating income.
- Despite high CapEx and competition, AMZN’s differentiated AI offerings and productivity gains justify a premium valuation, with a targeted 23.5% upside.
- Q3 guidance suggests the potential for Amazon to beat EPS estimates, driven by resilient consumer sentiment and strong demand for AWS and retail services.
- Do expect volatility in case some key economic indicators point to rates staying higher for longer.
Since I last covered Amazon (NASDAQ:AMZN) in January 2023, it has increased by more than 100%. At that time, I compared it with Oracle (ORCL) and showed how its AWS cloud business was better positioned to monetize GenAI opportunities.
This has been the case when looking at profitability, with quarterly EPS beating consensus estimates for the last seven quarters, as shown below.
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