Amazon Web Services is the largest global cloud-computing business, ahead of Microsoft’s Azure and Google Cloud.
Noah Berger/Getty Images for Amazon Web Services
Amazon.com
‘s latest earnings report showed it is still top dog in the cloud-computing market but it risks being caught by
Microsoft
and
Alphabet
‘s Google.
Amazon
‘s artificial-intelligence strategy is crucial to retaining leadership, according to analysts.
Amazon’s
(ticker: AMZN) 12% annual growth in its cloud-computing business, Amazon Web Services, initially disappointed stockholders in its third-quarter report. The stock only turned around when CEO Andy Jassy said the unit, which provides computing capacity remotely over the internet, booked some large contracts late in the quarter.
Analysts are hoping there are more contract wins to come, driven by Amazon’s provision of access to AI tools and hardware. There might need to be in order to match
Microsoft’s
(MSFT) impressive 28% growth in its own cloud business, although that was from a smaller base.
“While early, Amazon noted it thinks generative AI will be tens of billions of dollars of revenue for AWS over the next several years,” Seaport Research analyst Aaron Kessler wrote in a research note.
That was part of the reason Kessler raised his target price on the stock to $150 from $145 and kept a Buy rating on the stock.
Amazon shares were up 5.4% in premarket trading to $126.07 on Friday. Microsoft was up 1.2%, while Google-parent
Alphabet
(GOOGL) rose 0.8%.
Amazon hasn’t been as prominent in the AI hype this year as Microsoft or Google. However, that looks set to change with its investment of up to $4 billion in AI start-up Anthropic. Jassy told analysts on an earnings call that Amazon was well-placed for the AI battle due its clear leadership in cloud infrastructure, its housing of clients’ data, and its provision of custom chips for training large language models.
RBC Capital Markets analyst Brad Erickson said Amazon was “playing offense” on generative AI, noting it said its business compares favorably with competitors both in growth and absolute dollar amounts.
Erickson kept a $180 target price and Outperform rating on Amazon stock.
Write to Adam Clark at [email protected]
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