Analyst Says Amazon.com (AMZN) Cloud Business Needs to Show ‘Acceleration’ for Stock Outperformance

Amazon.com Inc (NASDAQ:AMZN) is one of the top 10 buzzing stocks to watch as AI trade makes a comeback, according to insidermonkey.com. Mark Mahaney, head of internet research at Evercore ISI, believes that Amazon’s stock performance hinges on the growth of its AWS business. He emphasized the importance of seeing further acceleration in AWS growth in the latter part of the year for the stock to outperform.

In the last reported quarter, AWS revenue soared by 16.9% year over year, with operating income increasing by 22.6%. AWS has exceeded a $100 billion annual run rate, playing a crucial role in helping businesses modernize infrastructure, cut costs, and drive innovation.

Despite being often overlooked by the market, Amazon’s ads business is thriving, generating over $10 billion in quarterly revenue. In the first quarter, ad revenue surged by 19% year over year to $13.9 billion, contributing to overall profitability.

Wall Street estimates project that Amazon could earn $6.20 per share in 2025 and $8.95 in 2027, showcasing a 44.4% earnings growth over two years. Lakehouse Global Growth Fund expressed confidence in Amazon’s ability to deliver solid revenue growth and margin expansion in its May 2025 investor letter.

The company reported a solid quarterly result with net sales increasing by 9% year-on-year to $155.7 billion, and operating profit rising by 20% to $18.4 billion. Despite a slight deceleration in AWS growth to $29.3 billion, management reassured that demand remains robust, with AI workloads growing by over 100% year-on-year on AWS.

Overall, Amazon continues to show promise in its core e-commerce business and AWS segment, positioning itself for sustained revenue growth and margin expansion in the coming years. Investors should keep a close eye on the company’s performance in the cloud business and ad revenue to gauge its future stock outperformance.