Amazon's Cloud Profitability Surges Past Expectations

Amazon's recent earnings report showed a near-in-line quarter for revenue and GAAP earnings, but a significant step-up in cloud profitability. The company delivered $200.61 billion in revenue, up 20% year-over-year, and GAAP earnings of $5.75 per share on net income of $62.6 billion.

However, when stripping out the valuation gain from its investment in Anthropic, normalized earnings came in at $1.97 per share against an expected $1.86. The stock rose 15.3% after the report, while the S&P 500 returned 0.7%, MSFT returned 3.0%, and GOOGL returned 6.7%.

The key takeaway from the report was AWS operating income of $16.6 billion, up from $10.2 billion a year earlier. This represents a margin widening of about 650 basis points year-over-year, or 520 basis points excluding a gain from fair-value accounting on energy contracts.