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3 Reasons to Hold AMZN Stock as AWS & AI Drive 31% Growth in 3 Months
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Key Takeaways
AMZN surged 31% in three months as AWS cloud dominance and AI initiatives drive growth momentum.
AWS dominates with 29% global cloud market share in Q1 and generated $29.3B revenues with 16.95 growth.
AI business achieves multi-billion run rate with triple-digit growth driving future revenue expansion.
Amazon (AMZN - Free Report) has demonstrated remarkable resilience and growth potential, surging 30.9% over the past three months, outperforming the broader Zacks Retail-Wholesale sector and the S&P 500’s return of 21.4% and 26%, respectively.
Combined, AWS, Microsoft (MSFT - Free Report) Azure and Alphabet (GOOGL - Free Report) -owned Google Cloud achieved a 63% share of total enterprise spending on cloud infrastructure services during the first quarter of 2025. AWS ranked No. 1 in market share by winning 29.1% share of the market, followed by Microsoft’s 40.7% and Google’s 24.1%. China’s largest and most dominant cloud company, Alibaba (BABA - Free Report) , achieved 9.4% global cloud market share.
Investors have recognized the transformative power of Amazon’s cloud computing and artificial intelligence (AI) initiatives in driving future growth.
3-Month Performance
Image Source: Zacks Investment Research
AWS Revenue Growth Maintains Strong Momentum
AWS continues to serve as the company's primary profit engine, generating $29.3 billion in first-quarter revenues with impressive 16.9% year-over-year growth. This performance translates to an annualized run rate of $117 billion, cementing AWS' position as the dominant force in enterprise cloud computing. The segment's operating margins expanded to 39.5%, demonstrating exceptional scalability and pricing power as organizations accelerate their digital transformation initiatives.
AWS also maintains a substantial backlog of $189 billion with a 4.1-year weighted average life, providing unprecedented revenue visibility and supporting long-term growth projections. This committed pipeline reflects enterprise customers' confidence in AWS' capabilities and suggests sustained demand for cloud services throughout 2025 and beyond. Recent customer acquisitions spanning diverse industries, including Adobe, Uber, and Nasdaq, demonstrate AWS' ability to capture market share across various sectors while expanding its total addressable market.
Management has indicated that supply constraints currently limit AWS' ability to capture additional AI-driven demand, suggesting that faster capacity deployment could drive even higher revenue growth rates. This bottleneck represents both a near-term challenge and a significant opportunity, as infrastructure expansion throughout 2025 could unlock accelerated performance in subsequent quarters.
AI Innovation Positions Amazon for Future Dominance
Amazon's AI business has achieved a multi-billion-dollar annual run rate with triple-digit growth rates, positioning Amazon advantageously in the generative AI transformation sweeping through enterprise technology.
Recent AWS developments demonstrate the company's commitment to AI leadership. The introduction of Amazon Nova Canvas with AI-powered image generation capabilities, the availability of Anthropic Claude 4 models, including Opus 4 and Sonnet 4 through Amazon Bedrock, and the launch of DeepSeek-R1 models showcase Amazon's ability to integrate cutting-edge AI technologies into its platform. These innovations provide customers with comprehensive AI solutions while creating additional revenue streams for Amazon.
Project Rainier represents Amazon's ambitious infrastructure investment in AI compute capabilities, designed to train next-generation AI models through powerful Trainium2 chip clusters. This initiative demonstrates Amazon's willingness to invest heavily in foundational AI infrastructure, potentially creating significant barriers to entry for competitors while establishing AWS as the preferred platform for AI workload deployment.
The enhanced Amazon Q Developer experience, now featuring cost optimization capabilities and Claude Sonnet 4 integration within the CLI, illustrates how Amazon leverages AI to improve customer productivity while driving platform adoption. These developments suggest that AI will continue serving as both a direct revenue generator and a catalyst for broader AWS growth.
Amazon's first-quarter financial results demonstrate the company's operational efficiency and margin expansion capabilities. Net income increased 64.4% year over year to $17.1 billion, while operating income rose 20.2% to $18.4 billion, representing 11.8% of revenues compared to 10.7% in the prior year. This margin expansion across a $155.7 billion revenue base reflects management's ability to scale operations effectively while maintaining growth momentum.
The company's balance sheet remains robust with $66.2 billion in cash and equivalents, providing substantial financial flexibility for continued AI infrastructure investments and strategic initiatives. Operating cash flow of $113.9 billion for the trailing 12 months, despite a decline in free cash flow to $25.9 billion, reflects the capital-intensive nature of Amazon's current growth investments.
The Zacks Consensus Estimate for 2025 net sales is pegged at $694.49 billion, indicating growth of 8.86% from the prior-year reported figure. The Zacks Consensus Estimate for 2025 earnings is pegged at $6.22 per share, which indicates a jump of 0.5% from the year-ago period.
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
However, new investors should exercise patience given Amazon's forward 12-month price-to-sales ratio of 3.25X, significantly above the Zacks Internet - Commerce industry average of 2.17X. This valuation premium suggests the stock may be fully valued at current levels, warranting a more strategic entry point during potential market corrections or company-specific volatility.
AMZN’s P/S F12M Ratio Depicts Premium Valuation
Image Source: Zacks Investment Research
Investment Recommendation
Current Amazon shareholders should maintain their positions as AWS and AI initiatives drive fundamental business transformation. The combination of sustained cloud growth, expanding AI capabilities, and improving operational efficiency supports the stock's recent 30.9% appreciation while indicating continued upside potential throughout 2025. AMZN currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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3 Reasons to Hold AMZN Stock as AWS & AI Drive 31% Growth in 3 Months
Key Takeaways
Amazon (AMZN - Free Report) has demonstrated remarkable resilience and growth potential, surging 30.9% over the past three months, outperforming the broader Zacks Retail-Wholesale sector and the S&P 500’s return of 21.4% and 26%, respectively.
Combined, AWS, Microsoft (MSFT - Free Report) Azure and Alphabet (GOOGL - Free Report) -owned Google Cloud achieved a 63% share of total enterprise spending on cloud infrastructure services during the first quarter of 2025. AWS ranked No. 1 in market share by winning 29.1% share of the market, followed by Microsoft’s 40.7% and Google’s 24.1%. China’s largest and most dominant cloud company, Alibaba (BABA - Free Report) , achieved 9.4% global cloud market share.
Investors have recognized the transformative power of Amazon’s cloud computing and artificial intelligence (AI) initiatives in driving future growth.
3-Month Performance
Image Source: Zacks Investment Research
AWS Revenue Growth Maintains Strong Momentum
AWS continues to serve as the company's primary profit engine, generating $29.3 billion in first-quarter revenues with impressive 16.9% year-over-year growth. This performance translates to an annualized run rate of $117 billion, cementing AWS' position as the dominant force in enterprise cloud computing. The segment's operating margins expanded to 39.5%, demonstrating exceptional scalability and pricing power as organizations accelerate their digital transformation initiatives.
AWS also maintains a substantial backlog of $189 billion with a 4.1-year weighted average life, providing unprecedented revenue visibility and supporting long-term growth projections. This committed pipeline reflects enterprise customers' confidence in AWS' capabilities and suggests sustained demand for cloud services throughout 2025 and beyond. Recent customer acquisitions spanning diverse industries, including Adobe, Uber, and Nasdaq, demonstrate AWS' ability to capture market share across various sectors while expanding its total addressable market.
Management has indicated that supply constraints currently limit AWS' ability to capture additional AI-driven demand, suggesting that faster capacity deployment could drive even higher revenue growth rates. This bottleneck represents both a near-term challenge and a significant opportunity, as infrastructure expansion throughout 2025 could unlock accelerated performance in subsequent quarters.
AI Innovation Positions Amazon for Future Dominance
Amazon's AI business has achieved a multi-billion-dollar annual run rate with triple-digit growth rates, positioning Amazon advantageously in the generative AI transformation sweeping through enterprise technology.
Recent AWS developments demonstrate the company's commitment to AI leadership. The introduction of Amazon Nova Canvas with AI-powered image generation capabilities, the availability of Anthropic Claude 4 models, including Opus 4 and Sonnet 4 through Amazon Bedrock, and the launch of DeepSeek-R1 models showcase Amazon's ability to integrate cutting-edge AI technologies into its platform. These innovations provide customers with comprehensive AI solutions while creating additional revenue streams for Amazon.
Project Rainier represents Amazon's ambitious infrastructure investment in AI compute capabilities, designed to train next-generation AI models through powerful Trainium2 chip clusters. This initiative demonstrates Amazon's willingness to invest heavily in foundational AI infrastructure, potentially creating significant barriers to entry for competitors while establishing AWS as the preferred platform for AI workload deployment.
The enhanced Amazon Q Developer experience, now featuring cost optimization capabilities and Claude Sonnet 4 integration within the CLI, illustrates how Amazon leverages AI to improve customer productivity while driving platform adoption. These developments suggest that AI will continue serving as both a direct revenue generator and a catalyst for broader AWS growth.
Strong Financial Performance Supports Investment Thesis
Amazon's first-quarter financial results demonstrate the company's operational efficiency and margin expansion capabilities. Net income increased 64.4% year over year to $17.1 billion, while operating income rose 20.2% to $18.4 billion, representing 11.8% of revenues compared to 10.7% in the prior year. This margin expansion across a $155.7 billion revenue base reflects management's ability to scale operations effectively while maintaining growth momentum.
The company's balance sheet remains robust with $66.2 billion in cash and equivalents, providing substantial financial flexibility for continued AI infrastructure investments and strategic initiatives. Operating cash flow of $113.9 billion for the trailing 12 months, despite a decline in free cash flow to $25.9 billion, reflects the capital-intensive nature of Amazon's current growth investments.
The Zacks Consensus Estimate for 2025 net sales is pegged at $694.49 billion, indicating growth of 8.86% from the prior-year reported figure. The Zacks Consensus Estimate for 2025 earnings is pegged at $6.22 per share, which indicates a jump of 0.5% from the year-ago period.
Amazon.com, Inc. Price and Consensus
Amazon.com, Inc. price-consensus-chart | Amazon.com, Inc. Quote
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
However, new investors should exercise patience given Amazon's forward 12-month price-to-sales ratio of 3.25X, significantly above the Zacks Internet - Commerce industry average of 2.17X. This valuation premium suggests the stock may be fully valued at current levels, warranting a more strategic entry point during potential market corrections or company-specific volatility.
AMZN’s P/S F12M Ratio Depicts Premium Valuation
Image Source: Zacks Investment Research
Investment Recommendation
Current Amazon shareholders should maintain their positions as AWS and AI initiatives drive fundamental business transformation. The combination of sustained cloud growth, expanding AI capabilities, and improving operational efficiency supports the stock's recent 30.9% appreciation while indicating continued upside potential throughout 2025. AMZN currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.