Buy AMZN Amid Solid Q3 Earnings Driven by Extensive AI Applications

Core Insights - Amazon.com Inc. reported third-quarter 2025 adjusted earnings of $1.95 per share, exceeding the Zacks Consensus Estimate of $1.58, and up from $1.43 per share a year ago [1][8] - The company achieved revenues of $180.17 billion, surpassing the Zacks Consensus Estimate by 1.29%, compared to $158.88 billion in the same quarter last year [2][8] - AWS revenue grew by 20.2% year over year, contributing $33.01 billion, despite competition from Alphabet and Microsoft [3][8] Financial Performance - Operating income remained flat year-over-year at $17.4 billion [2] - Online sales and subscription revenues increased by 9.8% and 11.5% year over year, respectively [3] - Advertising revenues rose by 23.5% year over year, while physical store sales increased by 6.7% [3] AI and Technological Advancements - Amazon is leveraging AI through partnerships, including using Anthropic's Claude chatbot and the Trainium2 AI chip, which saw a 150% sequential growth [6][8] - Anthropic has committed to using 1 million custom Trainium2 chips for its AI applications by the end of 2025 [7] - The launch of "Project Rainier," an $11 billion AI data center, will utilize 500,000 Trainium2 chips [7][8] Future Outlook - Amazon projects fourth-quarter 2025 sales between $206 billion and $213 billion, with a midpoint of $209.5 billion, indicating an 11% year-over-year increase [13] - The Zacks Consensus Estimate for fourth-quarter EPS is $1.91, reflecting a 2.75% year-over-year increase [13] - Amazon's long-term earnings growth rate is estimated at 22.2%, surpassing the S&P 500's growth rate of 13.5% [13] Stock Performance and Market Position - Following the earnings report, Amazon's stock price increased by 13.1% in after-market trading [4] - Despite this increase, Amazon has underperformed compared to the S&P 500 and its cloud rivals this year [15] - The average price target from brokerage firms suggests a potential increase of 20.6% from the last closing price, indicating a maximum upside of 36.9% [15]