Amazon (AMZN) remains one of the largest companies in the market, but its future still depends on a single business. That business is Amazon Web Services, which delivers most of Amazon’s operating income. As a result, investors mainly judge the stock by how fast AWS is growing. And that’s precisely what investors will want to hear about today, when the company reveals its quarterly earnings results.
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Lately, that growth has shown signs of life. In the third quarter, AWS revenue rose 20.2% from a year earlier, beating expectations and marking its first return to above 20% growth since 2022. The stock jumped soon after, though shares have since pulled back ahead of earnings.
Custom AI Chips Take Center Stage
A major part of Amazon’s AWS plan is building its own AI chips. These chips, known as Trainium, are designed in-house and aim to lower costs for customers. They also help Amazon reduce its reliance on Nvidia (NVDA) hardware, which remains costly and limited.
AWS vice president David Brown said customers now care most about value. “If they can find a chip and a processor that allows them to get more performance for fewer dollars, well, that’s a very strategic advantage for their business,” he told CNBC.
At the same time, rivals are moving fast. Microsoft Corp. (MSFT) and Alphabet Inc. (GOOGL) are seeing stronger cloud growth, supported by their own custom chips. Even so, AWS still leads the market by a wide margin.
Trainium chips are already gaining traction. According to analysts, Amazon has more than one million chips in use and over 100,000 customers. Some users report cost cuts of up to 50% on AI training and inference work.
Importantly, Brown added that the gap with traditional GPUs is shrinking. “There are very few things that a GPU is able to do that something like a Trainium accelerator can’t do,” he said.
Looking ahead, analysts expect AWS growth to move closer to the low-20% range. If that happens, AWS could again become the main force lifting Amazon shares, while spending plans and demand trends will remain key factors to watch.
Is Amazon Stock a Buy, Hold, or Sell?
On the Street, Amazon holds a Strong Buy consensus view, based on 37 ratings. The average AMZN stock price target is $298.53, implying a 34.58% upside from the current price.
