Bank of America revamps Amazon stock price after earnings

Amazon's (AMZN) artificial intelligence strategy is paying off. The company's third-quarter earnings report released on October 30 corroborates this. Amazon has added 3.8 GW of power capacity in the past year, which, according to the company, is more than any other cloud provider has added in the same period.

Andy Jassy, president and CEO of Amazon, commented during the earnings call on how AI is pushing this infrastructure build-out:

Amazon is also reducing headcount thanks to AI. The company laid off approximately 14,000 people, with further cuts expected next year, according to Reuters.

The company is also advancing its AI automation plan, which could result in hundreds of thousands of people losing their jobs. This plan prompted U.S. Senator Bernie Sanders to write a letter to Amazon founder and executive chairman Jeff Bezos, asking him questions about this plan. 

Sanders wrote: "What are Amazon's plans to provide help and support for the many hundreds of thousands of workers you'll be replacing with robots and AI?" 

Amazon stated that the company had no immediate response to the letter, adding that its automation goals are to assist workers and create new jobs, Reuters reports.

Bank of America raises AMZN price target

Bank of America analyst Justin Post and his team updated their opinion on AMZN stock following the release of the earnings report.

Here are the earnings highlights:

• Net sales increased 13% to $180.2 billion in the third quarter year-over-year. 
• Operating income of $17.4 billion, compared with $17.4 billion in Q3 2024.
• Net income increased to $21.2 billion,  compared with $15.3 billion in Q3 2024. 
• Diluted earnings per share (EPS) of $1.95, compared to $1.43 in Q3 2024.

Analysts noted that sales of $180.2 billion exceeded Wall Street estimates of $178 billion, adding that AWS growth of 20% accelerated approximately three percentage points quarter-over-quarter and is above Wall Street estimates of 18%. 

The company provided an outlook for Q4 2025:

• Net sales are expected to be between $206.0 billion and $213.0 billion
• Operating income is expected to be between $21.0 billion and $26.0 billion

Post noted that Amazon's Q4 revenue guidance is above Wall Street estimates, at $208 billion at the high end, and its profit outlook is also above Wall Street estimates, at $23.8 billion at the high end. The team raised its Q4 operating profit estimate to $26 billion (at the high end of the guide), reflecting accelerating higher-margin AWS revenue growth, shipping efficiencies, and retail headcount leverage. 

Analysts raised their estimates for 2026:

• Revenue from $786 billion to $801 billion
• Profit from $97 billion to $101 billion
• EPS from $7.43 to $7.75

The estimate for EPS in 2027 was increased by 6% to $9.28 from $8.77. 

In a research note shared with TheStreet, Post reiterated a buy rating and raised the target price from $272 to $303, based on his sum-of-the-parts analysis that values AWS at 10x 2027 sales, first-party retail at 1.1x, third-party retail at 2.5x, and advertising at 5.0x. Post's price target implies 3.7 times blended price to sales ratio, 13 times 2027 EBITDA, and 33 times 2027 EPS.

Analysts noted downside risks factor for Amazon:

• Increasing competition from offline and local retailers,
• AWS client cost optimization impact on revenues and margins,
• Regulatory pressure on the third-party marketplace.

They also noted that the stock has been subject to heavy volatility in the past, based on margin trends, and this volatility could increase due to economic uncertainty.

Amazon scores a $38 billion deal with OpenAI

Amazon Web Services and OpenAI entered into a multi-year, strategic partnership that provides AWS's infrastructure to run and scale OpenAI's core AI workloads. Under this new $38 billion agreement, OpenAI will access AWS compute, comprising hundreds of thousands of NVIDIA GPUs, with the ability to expand to tens of millions of CPUs to scale agentic workloads. 

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The infrastructure deployment that AWS is building for OpenAI will have clusters of NVIDIA GPUs, based on GB200s and GB300s, via Amazon EC2 UltraServers. The clusters are designed to support various workloads, from serving inference for ChatGPT to training next-generation models, with the flexibility to adapt to OpenAI's changing needs.

"As OpenAI continues to push the boundaries of what's possible, AWS's best-in-class infrastructure will serve as a backbone for their AI ambitions," said Matt Garman, CEO of AWS. "The breadth and immediate availability of optimized compute demonstrates why AWS is uniquely positioned to support OpenAI's vast AI workloads."

The announcement sent Amazon stock soaring, and it was trading 5% higher around near $256.5 at the time of writing.

Amazon's recent activity:

• Accenture (ACN) expanded its collaboration with AWS. Through the Accenture AWS Business Group, the companies will collaborate to create new solutions that use cloud and AI services to reduce operating costs, optimize resource allocation, and improve the quality of citizen services and defense capabilities.
• Amazon, together with teachers and students across 21 high schools in West Java, Indonesia, set a new GUINNESS WORLD RECORDS on October 15, for the "Most Applications Made In An On-site Generative AI Event," creating 10,821 unique Gen AI applications.
• The National Basketball Association (NBA) and AWS entered into a multi-year partnership. AWS will become the Official Cloud and Cloud AI Partner of the NBA and its affiliate leagues, including the WNBA, NBA G League, Basketball Africa League, and NBA Take-Two Media.
• MassRobotics announced the Physical AI Fellowship, a virtual program powered by AWS Startups and NVIDIA Inception to help robotics startups build, refine, and scale physical AI solutions. Throughout the program, fellows will work one-on-one with scientists and engineers from the AWS Generative AI Innovation Center to refine their physical AI solutions.

Related: Bank of America revamps Nvidia stock price after meeting with CFO