For much of this year, Amazon.com (AMZN.US) shares were weighed down by concerns that its cloud computing business was losing ground to competitors. However, those worries have now temporarily dissipated. Last week’s earnings report revealed that Amazon Web Services (AWS) posted its fastest sales growth in three years, followed by a $38 billion cloud services deal with OpenAI. These positive developments indicate a resurgence in growth momentum for AWS, Amazon’s core business.
Driven by this news, Amazon’s stock surged 12% over the past four trading sessions, adding approximately $300 billion in market capitalization and reaching a new all-time high for the first time since February. Robert Pavlik, Senior Portfolio Manager at Dakota Wealth Management, noted, “The earnings performance and the OpenAI deal suggest that AWS’s growth acceleration may be sustainable. Investors must take Amazon more seriously in AI investment considerations, as it is one of the few companies generating tangible returns from massive AI spending.”
AWS has long been a key driver of Amazon’s stock performance, contributing significantly higher operating profits relative to its revenue share compared to the retail segment. However, prior to Q3, AWS revenue growth had been slowing, while competitors like Alphabet’s (GOOGL.US) Google Cloud, Microsoft’s (MSFT.US) Azure, and Oracle (ORCL.US) saw accelerating growth—a trend that previously dragged on Amazon’s stock.
Despite the recent rebound, Amazon’s year-to-date performance still lags. Its shares have risen 14% this year, underperforming the S&P 500 (up 16%) and the Nasdaq 100 (up 22%). Among the so-called “Magnificent Seven” U.S. tech giants, Amazon also trails Nvidia (NVDA.US), Microsoft, and Alphabet.
However, bulls believe this underperformance won’t last. Before last week, Amazon’s valuation had been declining, with its forward P/E ratio dropping below 24x in mid-October—only the second such occurrence since the 2008 financial crisis. With AWS regaining growth momentum, investors see room for valuation expansion. Even after rebounding to 27x, its forward P/E remains well below its 10-year average of 47x.
Mark Mahaney, an analyst at Evercore ISI, stated in a November 3 research note that Amazon’s stock could nearly double if its valuation multiples return to previous levels. “With AWS revenue growth sustainably recovering above 20%, Amazon’s stock presents a major revaluation opportunity,” he said.
AWS revenue grew 20% year-over-year in Q3 to $33 billion, marking the largest increase since 2022. Wall Street analysts widely expect AWS growth to accelerate further in the next two quarters. This improved outlook has led analysts to raise Amazon’s 2026 earnings estimates by 2.5% over the past week.
Nevertheless, Amazon still faces fierce competition in cloud computing. While it remains the market leader, Microsoft and Alphabet also reported strong cloud growth last week, and Oracle’s early-September results showed rapid market share gains, albeit from a smaller base.
Still, the latest earnings momentum has convinced Matt Tuttle, CEO of Tuttle Capital Management, to reconsider Amazon. “The cloud business is back. Among the Magnificent Seven, Amazon has shifted from laggard to leader,” he said, adding that Amazon is now his top investment choice.