Tech major Amazon’s (AMZN) cloud services unit, Amazon Web Services, or AWS, suffered an outage, which affected a gamut of websites and apps across companies such as Snapchat, WhatsApp, and Slack in social media; Fortnite and Roblox (RBLX) in gaming; and PayPal (PYPL)-owned Venmo in fintech. Early morning, yesterday, AWS reported that they were experiencing high error rates and latency in the Virginia region, leading to over 11 million user reports of problems across various applications and platforms.
However, the cloud leader resolved the core issues within three hours of the outage, and normal services were mostly resumed by early afternoon. This also resulted in limited impact on the company’s stock. In fact, the AMZN stock was up 1.6% in yesterday’s trading session.
Nonetheless, the outage has emboldened Amazon’s naysayers to make a stronger case for not owning the AMZN stock, which is down 0.5% on a year-to-date (YTD) basis. Further, the skeptics have highlighted AWS’s shrinking market share in the cloud business while also accusing it of being the “second Apple” in terms of lack of AI initiatives. Yet, investors ignoring the $2.3 trillion market-cap company are doing so at their own peril. Why? Let’s analyze.
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Amazon is not just an e-commerce giant, as apart from being the global leader in cloud services, the Seattle-based company also dabbles in streaming, logistics, and consumer electronics as well. This flywheel of businesses has resulted in the company reporting revenue and earnings CAGRs of 15.80% and 39.90%, respectively, over the past five years.
Moreover, Amazon’s earnings have exceeded Street expectations consecutively for more than two years. In the most recent quarter as well, the company reported a beat on both revenue and earnings.
In Q2 2025, the company reported net sales of $167.7 billion, an increase of 13% from the previous year. This is remarkable growth for a company that is operating on such a scale. Sales for AWS jumped by 17.5% in the same period to $30.9 billion. Also, both the national and international segments witnessed year-over-year (YoY) growth rates of 11% and 16% to come in at $100.1 billion and $36.8 billion, respectively.
Earnings went up by 33.3% from the prior year to $1.68 in Q2 2025, easily outpacing the consensus estimate of $1.33, as the company guided for net sales to be in the range of $174.0 billion and $179.5 billion for the third quarter. The midpoint of this range would indicate an annual growth of 11.2%.
Cash flows also remained healthy, as Amazon’s net cash from operating activities was at $32.5 billion in the quarter compared to $25.3 billion in the year-ago period. Overall, the company closed the June ’25 quarter with a cash balance of $57.7 billion with no short-term debt on its books.
Finally, analysts are also convinced about Amazon’s growth prospects, forecasting forward revenue and earnings growth rates of 10.74% and 37.80%, much higher than the sector medians of 3.03% and 6.46%, respectively. Amazon will report its Q3 earnings on October 30.
As highlighted above, Amazon has plenty of things going in its favor. Agreed, it requires heavy expenditure and shrinks margins in the short term, but in the long run, the upside can be quite juicy for Amazon shareholders. Notably, the firm is presently immersed in an intensive spending push, ramping up investments in automated logistics setups, expanded data center facilities, and bespoke AI systems.
Further, amid the buzz suggesting AWS is slipping in the rankings, the unit still commands a solid 30% slice of the global cloud pie. That edge stems from its blend of seasoned tech, massive operational reach, layered partner ecosystem, and dependable balance sheet. Also, its sweeping array of more than 200 polished services touches on everything from computing power (EC2) and data storage (S3) to database management (RDS, DynamoDB), AI tools (SageMaker), and no-server options (Lambda). Azure and Google Cloud, for all their strengths, field narrower in-house catalogs and turn more often to outside vendors, especially when piecing together data crunching or AI workflows.
Beyond that, AWS’s core networking backbone and international sprawl deliver top-tier growth potential and snappy performance. Backed by over 30 regions and more than 100 availability zones around the globe, it keeps workloads humming close to where users actually sit, cutting out delays, slashing outage risks, and easing compliance hurdles via on-site data handling.
Thus, for all the bumps lately, AWS stays the linchpin holding up the worldwide cloud setup.
On the AI side, Amazon is rolling out homegrown silicon like the Trainium 2 chips that are now hitting high-volume output. These processors are already in play for big lifts, such as powering the training behind Anthropic’s fresh Claude 4 release and fueling parts of the Bedrock suite. Against standard GPU rigs, Trainium edges out with 30% to 40% stronger price performance.
Bedrock itself, Amazon’s turnkey hub for spinning up generative AI builds, is seeing brisk uptake. Over in foundation models, the outfit’s own Nova is building real headway, now sitting as the No. 2 draw on the Bedrock roster.
Additionally, the ad operation is firing on more cylinders as well, pulling in $15.7 billion during the second quarter, with that energy set to spill over into the year-end frenzy as brands pour more cash into Amazon’s shopping hub and video streams. Factor in the 300 million-plus Prime faithful, whose steady engagement keeps the wheels turning in a feedback loop: busier users mean richer ad hauls, which then pad the bottom line on the e-commerce front.
Thus, Amazon’s big-picture story holds up thanks to the raw heft of its online marketplace, the smart redeployment of customer insights into side gigs like pinpointed promotions or wellness nudges, and the self-sustaining spin from its sprawling business tangle.
Overall, analysts remain quite bullish on the AMZN stock, attributing to it a rating of “Strong Buy,” with a mean target price of $267.30, which denotes an upside potential of about 23% from current levels. Out of 57 analysts covering the stock, 50 have a “Strong Buy” rating, six have a “Moderate Buy” rating, and one has a “Hold” rating.
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On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
