Amazon Web Services (AWS) is poised for even stronger growth, according to CEO Andy Jassy, who recently shared optimistic forecasts during the company's third-quarter earnings call. AWS, which offers a wide range of AI services, has seen six consecutive quarters of accelerating revenue growth, driven by its expanding portfolio of AI solutions. The platform's revenue surged to $45.9 billion in the third quarter, a 39% year-over-year increase, with significant demand for its AI chips and foundation models.
Jassy highlighted that AWS Bedrock, which provides over 100 foundation models from companies like OpenAI and Meta Platforms, is the fastest-growing multibillion-dollar business in AWS's history. Fortune 500 companies increased their spending on Bedrock sevenfold compared to the same period last year. The company also reported a $578 billion order backlog, indicating robust future demand. Jassy predicts AWS could achieve over 40% revenue growth in 2027 and 2028 and potentially become a trillion-dollar business within the next five to ten years.
Despite a 15% correction in Amazon's stock price from its August high, the company's valuation remains attractive. Amazon's price-to-earnings (P/E) ratio stands at 19.4, significantly lower than the Nasdaq-100 index's P/E of 29.9. However, analysts expect earnings to decline to $10.58 per share in 2027 due to non-operating profit reductions, which could slightly increase the forward P/E to 22.8.
Amazon plans to invest heavily in data center infrastructure, spending around $220 billion in 2026 and even more in 2027. Jassy assured investors that these investments are likely to deliver higher yields and free cash flow than anticipated, supporting long-term growth prospects.