Amazon Reports Fastest Cloud Growth Since 2022

Bloomberg

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00:00John, this is a stock that had been chronically underperforming before today was only up one

00:04and a half percent year to date. Has Amazon showed that it deserves to play catch up with

00:09the rest of the Mag 7? Yeah, I think so. I mean, at this point now, they're firing on all cylinders

00:16and the big focus was AWS and they beat expectations and they were bullish on forward

00:23growth, posted 20 percent revenue growth, almost three points of acceleration. That beat investor

00:29expectations driven by core and AI workloads. And they're really focused on accelerating AI

00:36capacity just given the strong demand. And they told us last night, and this was kind of new metrics,

00:41that the capacity they've added over the last year is up 2x since 2022. And then they're going to

00:48double it again by 2027. So there's a lot of AI capacity coming online for AWS now and over the

00:54next couple of years. And they're filling the data centers with NVIDIA chips, AMD chips, and their

00:59own Trinium chips. And another thing about AWS, this narrative, CEO Jassy kind of dispelled this

01:07narrative around AWS and NVIDIA saying, hey, we have a deep relationship with NVIDIA. We're not

01:13constrained from buying NVIDIA chips. We're buying them now and we'll buy them in the future. And

01:18and then they're also at the same time using their own Trinium chips, which are helping with the

01:23capacity. So net net all in with the robust growth and the capacity, we increased our AWS long-term

01:30numbers. We expect faster acceleration now up to almost 25 percent growth by 2027.

01:37So you buy that because it was beginning to look like those companies not in the Stargate or those

01:45companies not really in the in the president's circle may not be getting as many chips from

01:52Jensen as those who are. You know, he seems to be NVIDIA giving a lot of chips to Oracle and Microsoft

01:58and fewer to to Amazon. Yeah, I do buy that. You know, I think I think, yeah, as I said, I mean,

02:07Andy, you know, kind of laid it out pretty clearly in his in his prepared remarks. And I'd also say this

02:14other thing about the the AI narrative for for AWS is, you know, people calling AWS or Amazon an AI loser.

02:21You know, they have a deep partnership with Anthropic. They're the primary cloud vendor and primary training

02:27partner. And as they announced earlier this week, they just opened up this project Rainier, which is dedicated to

02:33training at least the first parts of the training the Anthropic models. So, again, this all of this kind of ties into us

02:41now expecting even faster acceleration at AWS. John, Meta is also one of the companies you cover. You have a buy

02:47rating on that one as well. I'd love to get your take on yesterday when you have Meta coming to market

02:51with a 30 billion dollars worth of bonds. It gets four times oversubscribed. So the credit market likes

02:58what it sees. Yet it's an equity market that saw shares fall more than 11 percent. And you add weight to that

03:04today down one and a half percent. What do you make of the two different receptions from an equity and a bond

03:09market? Yeah, I mean, if we look at the if we also cover Amazon and also Alphabet, if we look at the three

03:18of them, you know, Amazon and Alphabet have cloud businesses. They're all accelerating their CapEx spend to build out

03:25AI infrastructure. But we're seeing the acceleration for AWS and Google Cloud and huge backlog growth for

03:34them. And Amazon and Alphabet are utilizing AI across their other business segments. For Meta, they are

03:42beating on revenue and they are using AI to drive faster revenue, which is driving via higher engagement and

03:51better ad targeting. But they did lay out really aggressive OpEx and CapEx growth for next year.

03:59They'll they'll get it. They'll give a more specific guide at 4Q. But I think that kind of scared people,

04:06scared investors. But I do think CEO Zuckerberg did kind of say, like, listen, like we're we're going to be

04:12aggressive with spend on AI talent and on and and for interest infrastructure purposes. But listen,

04:21like if superintelligence doesn't get here in the next couple of years, we'll maybe have this extra

04:26capacity that will sell externally. We're already we're talking about, you know, obviously AWS earlier

04:31and their cloud growth and or we'll just pull back a little bit. So we'll have to see. It'll it'll be

04:37pretty big at 4Q when they give that, you know, CapEx guide and initial OpEx guide for 2026.

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