Amazon is enjoying a financial boost with a nearly 6% surge in its share prices last Friday, largely thanks to signs of life in its cloud business. This segment had been performing sluggishly for nearly two years due to decreased client spending, but now seems to be on the mend. As a result, Wall Street is optimistic about the company’s future prospects. The recovery in cloud services alone is projected to add an astounding $70 billion to Amazon’s market capitalization, based on a premarket share price of $127.
Notably, the cloud market’s renewed energy wasn’t limited to Amazon. Tech industry stalwarts Microsoft and Alphabet each registered about a 1% gain in share prices. Amazon CEO Andy Jassy affirmed that the cloud business was finding its footing. He noted that both large-scale expansions with existing clients and new agreements are expected to spur growth in the last quarter of this year. Amazon Web Services, or AWS, which is the backbone of the company’s profits, looks poised for a growth spurt.
Adding another layer of potential to this promising scenario, Jassy indicated that artificial intelligence (AI) could serve as a significant revenue source for AWS in the coming years. Brokerage firms are taking note; approximately 19 of them raised their price targets for Amazon’s stock, with the median target now standing at a hopeful $173.
However, the tech giant wasn’t immune to market fluctuations. In the days prior to its recent rally, Amazon saw an almost 8% dip in its shares. This downward movement was primarily spurred by Alphabet’s warning about cloud customers reducing their spending. Despite these setbacks, Amazon has showcased resilience.
To stay ahead in the game, the company is actively expanding its horizons. A recent move included an investment of up to $4 billion in chatbot-maker Anthropic. Amazon also rolled out its Bedrock AI service, which has already captivated thousands of customers.
The third quarter of this year holds special significance for Amazon. It marked the company’s first quarter-on-quarter increase in cloud growth in nearly two years, although the revenue didn’t meet expectations. Even so, with strong growth drivers like key partnerships that have been forged recently, Amazon appears to be well-positioned for future market dominance.
