Amazon (NASDAQ: AMZN) has been a standout performer, with shares surging 79.9% since a “buy” recommendation in October 2023. Over the same period, the S&P 500 gained 40.8%. Recent financial data shows strong revenue and profitability growth, particularly in its North America and AWS segments, and a notable turnaround in its international operations. While shares are no longer as cheap as they were, they remain reasonably priced, justifying a continued “soft buy” rating.
Amazon’s Remarkable Growth Story
Amazon has continued to defy expectations with its financial performance. In Q3 2024, revenue reached $158.88 billion, up 11% from $143.08 billion in Q3 2023. Net profits surged 55.2% year-over-year, climbing from $9.88 billion to $15.33 billion. Operating cash flow rose 22.4% to $25.97 billion, and adjusted cash flow grew an impressive 27.3% to $32.65 billion.
The company also saw EBITDA increase by 32.3%, from $23.32 billion to $30.85 billion. These results reflect Amazon’s ability to maintain high growth levels, even as one of the largest companies in the world.
North America: A Consistent Performer
Amazon’s North America segment remains its largest revenue contributor. In Q3 2024, the segment generated $95.54 billion, up 8.7% from $87.89 billion in Q3 2023. For the first nine months of 2024, revenue grew to $271.91 billion, a 9.9% increase compared to $247.31 billion in the same period the previous year.
Profitability in North America also improved. Operating profits rose 31.5%, from $4.31 billion to $5.66 billion, with operating margins expanding from 4.90% to 5.93%. Key drivers included higher unit sales, increased advertising revenue, and a focus on pricing and convenience.
International Segment: A Turnaround Story
Amazon’s international operations have historically lagged behind North America, but Q3 2024 marked a turning point. The segment reported a $1.30 billion profit, compared to a $95 million loss in Q3 2023. Revenue rose 11.7% year-over-year, from $32.14 billion to $35.89 billion.
For the first nine months of 2024, international revenue reached $99.49 billion, a 9.4% increase over $90.96 billion in 2023. Adjusted for foreign currency fluctuations, this represents a 10.8% rise. Profitability improvements are attributed to economies of scale and strategic operational adjustments.
Read more: Economic Forecast For 2025 And Beyond: Growth With Continued Inflation
Amazon Web Services (AWS): The Growth Engine
Amazon Web Services (AWS) continues to be a powerhouse. In Q3 2024, AWS generated $27.45 billion in revenue, up 19.1% year-over-year. Operating profits for the segment rose 49.8%, from $6.98 billion to $10.45 billion. For the first nine months of 2024, AWS profits surged 67.2%, from $17.46 billion to $29.20 billion.
AWS benefits from the growing global cloud computing market, which Goldman Sachs estimates will expand from $496 billion in 2023 to $2 trillion by 2030. Generative AI investments are expected to play a significant role in this growth, with spending projected to reach $200-$300 billion by 2030.
Valuation and Outlook
Despite recent price increases, Amazon shares remain reasonably valued. While trading multiples are higher than in previous analyses, they still reflect the company’s strong growth potential.
Takeaway
Amazon has demonstrated robust growth across its key segments, supported by strategic initiatives and market expansion. While the “easy money” may have already been made, the company’s consistent performance and reasonable valuation suggest further upside for long-term investors.
Stock Trader’s Almanac 2025 (Almanac Investor Series)
Stock Trader’s Almanac 2025 (Almanac Investor Series)
58th Annual Edition of the leading resource on US stock market trend, patterns, and cycles