Amazon

Investment Thesis

AWS growth is reaccelerating as enterprise AI workloads migrate to Bedrock, and the advertising business continues to take share from legacy digital channels. We maintain a Buy rating with a price target of $245.

What Changed

AWS grew at its highest rate in seven quarters, with generative AI workloads representing a measurable contributor to incremental revenue. Bedrock’s model marketplace is seeing genuine adoption across industries — particularly in financial services, healthcare, and media production.

The advertising business is the underappreciated earnings driver. Amazon’s advertising ROAS (return on ad spend) is now consistently benchmarked above Meta and Google for retail-intent queries. This positions AWS Advertising for continued share gains against the established duopoly.

Retail Margin Expansion

Prime and logistics efficiency improvements continue to flow through to operating income. One-day delivery cost per package has declined meaningfully, and the same-day delivery buildout is ahead of schedule in major metro markets.

Third-party seller services are also growing faster than first-party retail, which structurally improves the revenue quality of the retail segment by shifting toward a higher-margin marketplace model.

Risks

AWS growth could decelerate if the current AI infrastructure spend cycle turns. Amazon also faces competitive pressure in retail from Temu and Shein in lower-margin categories, which could compress retail operating margins if not managed carefully.

Regulatory scrutiny on the marketplace business practices is ongoing in both the EU and US.