Saad Ullah
AMZN stock sees an after-hours jump as Amazon’s cloud and retail divisions deliver strong Q3 performance, beating expectations.
Amazon Stock Rallies After Q3 Earnings Beat
Amazon (AMZN) stock surged over 3% in after-hours trading following the company's release of better-than-expected third-quarter results. The e-commerce and cloud leader reported revenue growth of 11%, driven by steady performance across its major business sectors, including Amazon Web Services (AWS) and North American retail. Amazon's Q3 earnings came in at $1.43 per share, exceeding analysts’ expectations of $1.14, with quarterly revenue reaching $158.9 billion against a forecast of $157.3 billion by FactSet.
AWS, Amazon's flagship cloud division, was a significant contributor to the earnings beat, delivering $10.4 billion in operating income, above expectations of $9.1 billion. AWS reported sales of $27.45 billion, close to the anticipated $27.5 billion. Analysts had expressed concerns over AWS's potential for growth after Microsoft, a key cloud competitor, issued a soft forecast on Wednesday. Despite this, AWS continues to power Amazon’s profitability, bolstering investor confidence in the company’s cloud sector resilience.
North American Division Adds to AMZN's Strong Q3
Amazon's North American retail division also posted impressive results, with operating income growing 32% to $5.7 billion, surpassing estimates of $5.4 billion. This segment includes Amazon's vast e-commerce operations, advertising, seller services, and Project Kuiper, the company's ambitious satellite internet project. The robust performance underscores Amazon's success in diversifying income streams within its retail sector, which continues to contribute significantly to the company's bottom line.
For the fourth quarter, Amazon forecasted sales of around $185 billion, slightly below analyst projections of $186.3 billion. However, the company expects operating income of $18 billion, exceeding the $17.3 billion consensus. Analysts view this guidance as a positive sign, given Amazon's recent heavy investments in AI infrastructure and satellite initiatives like Project Kuiper. RBC Capital analyst Brad Erickson remarked on Amazon’s Q3 performance as “better than feared,” emphasizing gains from Prime, advertising, and first-party sales as drivers behind the revenue beat.
Brad Erickson commented: Total revenue beat expectations driven by first-party, Prime and to a lesser degree advertising, partly offset by a modest miss out of (third-party seller fees) and AWS slightly below estimates.
AMZN Stock Technicals and Market Position
Before the earnings announcement, Amazon stock was trading about 7% below its 201.20 buy point, a peak reached in July. Amazon's Relative Strength Rating (RSR) stands at 75 out of a best-possible 99, meaning AMZN outperformed 75% of stocks over the past year. Its IBD Composite Rating is also high, at 92 out of 99, indicating Amazon's strong growth potential compared to other stocks.
The steady Q3 performance, led by robust earnings from AWS and North American retail, coupled with an optimistic profit outlook for Q4, paints a promising picture for Amazon’s future amidst its expansion into AI and satellite internet technologies.
Saad Ullah
