AMZN closed at $207.33, up 4.1% on the day.
The move came after Amazon announced a $38 billion, 7-year deal with OpenAI to host their AI workloads on AWS. The partnership will run on hundreds of thousands of Nvidia H100 GPUs through AWS data centers.
AWS did $26.3 billion in revenue last quarter, up 19% year over year. Operating margin on AWS is 35.1%. The rest of Amazon’s business (retail, ads, etc.) runs at around 5-6% margins. AWS is roughly 16% of total revenue but generates the majority of operating income.
Amazon’s total backlog entering Q3 was $156.6 billion. The OpenAI contract adds to that.
Forward P/E is 38.2x. Full year revenue estimate is $638 billion. EPS estimate for 2025 is $5.46. The stock is up 28.3% year to date and hit a new 52-week high today.
AWS growth decelerated through 2023 and has been recovering since. Last quarter was 19%. The quarter before was 17.2%. Direction is good.
OpenAI was previously tied closely to Microsoft Azure. This deal shifts some of that compute spend to AWS.
Q4 earnings will show whether AWS can cross 20% growth again. That is the number to watch.
My take: I’m 16 and even I know that when the most hyped AI company in the world ditches your competitor to sign a $38 billion deal with you, that’s not nothing. Everyone thinks of Amazon as the place you order stuff from and it shows up the next day. But AWS is basically the landlord of the internet at this point, and OpenAI just signed a very long lease. I don’t own AMZN yet but I’m watching Q4 earnings. If AWS cracks 20% growth I think this thing has more room.