Analysts boosted their outlooks for e-commerce and cloud computing company Amazon (AMZN, Financials) on Friday after better-than-expected growth from its AWS unit spurred a significant premarket rise.
Amazon said second-quarter revenue surged to $200.6 billion, up 20% from a year earlier, while operating income increased 43% to $27.5 billion. Sales of AWS rose 37% to $42.2 billion, relieving concerns that big spending on artificial intelligence would cut into earnings.
RBC Capital Markets reiterated its outperform rating and boosted its target price to $330, noting quicker AWS growth, a stronger backlog and superior margin performance.
Morgan Stanley said AWS posted growing growth and profitability, while Wells Fargo kept Amazon as a top selection after cloud margins beat forecasts.
Bank of America also referred to improved AI momentum. Revenue from AI-related products climbed to 15% of cloud sales, driven by capacity growth, enhancements to Trainium and increased demand for Bedrock, the company said.
Amazon raised its expected capital spending to $220 billion from $200 billion, primarily due to higher memory costs and continued spending on infrastructure. The rise could squeeze free cash flow, but analysts said the outlay could bolster long-term cloud and AI returns.
Investors will be looking to see if AWS can maintain its growth rate, and whether Amazon's increased spending translates into sustained gains in cloud revenue, margins and backlog.