Amazon's AWS Growth Sets Stage for Most Profitable Phase Yet
Amazon's growth has reached new heights, and analysts predict its next phase will be the most profitable yet. In the second quarter, AWS, Amazon's cloud computing division, grew 37% with a 39.4% operating margin. This profit engine is driving the company's thesis, with a price target of $327.14.
The model's confidence in this prediction is high, at 70%, and even the bear case estimate sits above today's price. Amazon's AWS has an impressive backlog of $496 billion, dwarfing its rivals' near-term AI pipelines. The company's capital expenditures jumped 68% to $54.21 billion in Q2, but analysts say servers take only about three years to break even.
The optimistic case for Amazon's future growth is supported by its president, Andy Jassy, who stated that AWS 'could very possibly be a trillion dollar annual revenue business for us in time.' The company's AI and chip divisions are also seeing significant growth, with each topping $25 billion in run rate.
Analysts have set price targets of up to $376.29 if the optimistic case plays out. However, some caution is warranted as Amazon's long-term debt has climbed to $119.1 billion from $65.6 billion.