AWS Achieves Fastest Growth in 18 Quarters. And That May Not Even Be the Best Part of Amazon’s Latest Earnings Report.

Amazon (NASDAQ:AMZN)stock was soaring on Friday after the company delivered its strongest quarterly growth in five years, breezing past analyst estimates.

Revenue jumped 20% to $200.6 billion, ahead of the analyst consensus at $196.4 billion, and operating income rose 43% to $27.5 billion.

Amazon Web Services, the company’s cloud computing division, got the bulk of the attention from investors, reporting its fastest growth in nearly five years as revenue rose 37%, in line with peers like Alphabet and Microsoft, which also saw cloud growth take off.

Amazon also said it exceeded a $25 billion annual revenue run rate in both AWS’s AI business and its chips business, both up triple digits year-over-year, helping to justify the $220 billion the company plans to spend on capital expenditures this year.

However, while the cloud growth was clearly impressive, investors shouldn’t overlook the results in its core e-commerce business, which helps explain why the stock was up 13% Friday morning.

North America revenue rose 16% to $116.2 billion, also marking its fastest growth in that segment in five years. The international segment saw similar results with revenue up 15% to $42.2 billion.

Image source: Amazon.

What’s driving the e-commerce growth

Amazon credited faster delivery speeds for the growth, saying that more than 40% of Prime orders were delivered same-day or overnight, and the company reported advertising growth of 26% to $19.8 billion in the quarter, its fastest growth rate in that category since 2023.

The e-commerce business was also boosted by shifting Prime Day from July to June due to the FIFA World Cup and the United States’ 250th anniversary celebration. That appeared to add roughly 500 basis points to e-commerce growth in the quarter.

Both divisions also reported solid operating income growth, up from $7.5 billion to $9.1 billion in North America, and from $1.5 billion to $1.7 billion in the International segment.

The company has made advanced in groceries and everyday essentials, noting that same-day delivery of perishables is now available in 2,300 U.S. cities. CEO Andy Jassy said the category was a “needle mover” for the company and that monthly active perishable customers had grown more than 50% since the start of the year.

Amazon also expanded its ultra-fast delivery service, Amazon Now, which offers delivery in 30 minutes or less on everyday essentials, to 80 new U.S. cities and to cities in Egypt.

Overall, the company continues to operate with a familiar playbook, providing fast delivery and convenient service to Prime members, and Jassy said that Prime remains a key pillar of the business.

Is Amazon a buy?

Amazon reported a one-time gain from equity investments of $53.4 billion, primarily due to its stake in Anthropic. Because the company doesn’t adjust for those gains, determining its valuation can be tricky. However, it’s on track to exceed $100 billion in operating income, and AWS’s growth rate is a strong sign of the overall momentum of the business.

Amazon now trades at roughly 30 times the $100 billion operating income, which seems like a reasonable price to pay for a company with its network of competitive advantages. Amazon will likely be the first company to reach $1 trillion in revenue in 2028, and it still has a clear path to double-digit growth.

The stock can march a lot higher from here.

Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy.