Amazon Stock Rises After Beating Third Quarter Earnings

Amazon Shares rose 6% on Friday after the company reported better-than-expected earnings, driven by growth in its advertising and cloud computing businesses.

The stock is up about 32% for the year. Shares briefly touched $200.50 on Friday, putting them near an all-time high. Its highest close was $200, a mark the stock hit twice in July. The stock closed at $197.93 on Friday.

Revenue rose 11% in the quarter to $158.9 billion, beating the $157.2 billion estimate of analysts surveyed by LSEG. Earnings of $1.43 beat analysts’ average estimate of $1.14.

Sales at Amazon Web Services’ cloud business rose 19% to $27.4 billion, just shy of analyst estimates, according to StreetAccount. This is an acceleration from 12% a year ago, but lags the growth rate of its rivals. microsoft and Googlewhere cloud revenue increased by 33% and 35%, respectively. Microsoft’s Azure number includes other cloud services.

Amazon’s capital expenditures increased 81% year over year to $22.62 billion, as the company continues to invest in data centers and equipment such as NVIDIA processors to power artificial intelligence products. Amazon has launched several AI products across its cloud and e-commerce businesses, and is also expected to announce a new version of its Alexa voice assistant powered by generative AI.

“Amazon has integrated AI into what is the most diverse technology footprint of any mega-cap, with multibillion-dollar revenue streams across e-commerce, advertising, subscriptions, online video and cloud,” Roth MKM analysts wrote in a note after the earnings report. They have a buy rating on the stock.

Brian Olsavsky, Amazon’s chief financial officer, said on the earnings call that the majority of the company’s capital spending in 2024 will go to supporting the growing need for technology infrastructure.

CEO Andy Jassy said the company plans to spend about $75 billion on capital spending in 2024 and suspects it will spend more next year.

“The increase in obstacles here is actually due to generative AI,” Jassy said on the call. “It’s a really unusually large, maybe once-in-a-lifetime opportunity,” he said, noting that shareholders “will feel good about this long term because we’re aggressively pursuing it.”

Advertising was another bright spot. The unit’s sales rose 19% to $14.3 billion during the quarter, meeting expectations and outpacing growth in Amazon’s core retail business.

Amazon’s advertising growth was roughly in line with Goalwhich saw an 18.7% expansion and faster growth than Google, which reported a 15% increase in advertising revenue. BreakSales were also up 15% from the previous year.

Amazon forecast revenue in the current quarter would be between $181.5 billion and $188.5 billion, which would represent growth of 7% to 11% year over year. The midpoint of that range, $185 billion, missed analysts’ average estimate of $186.2 billion, according to LSEG.

—CNBC’s Ari Levy contributed to this report.