Amazon's Q2 Earnings Impress: Focus On AI And Margin Improvement Praised By Analysts

Shares of Amazon.com, Inc. AMZN climbed in early trading on Friday, after the company reported blowout profits for the second quarter.

The results came amid a busy earnings season. Here are some key analyst takeaways from the earnings release.

Morgan Stanley On Amazon

Analyst Brian Nowak maintained an Overweight rating, while raising the price target from $150 to $175.

Amazon’s quarterly results and guidance were strong “across Retail and AWS,” Nowak said in a note “AWS has stabilized and is now seeing more customers shift their focus toward driving innovation, bringing new workloads to the cloud,” he added.

“Management also detailed its triple-pronged AWS AI strategy across the compute, LLMs and application layers… which we believe will lead to structurally faster AWS growth in '24 and beyond,” the analyst further wrote.

Needham On Amazon

Analyst Laura Martin reiterated a Buy rating, while lifting the price target from $150 to $160.

“We applaud AMZN's focus on profits (finally),” Martin said. “We believe that lower fulfillment and delivery costs will offset higher investments in generative AI's training and inference capabilities in FY24,” she added.

Amazon plans to invest in AI across all its business units, especially at AWS, and its multiple generative AI initiatives are expected to “improve AMZN's ROIC within 24 months,” the analyst further stated.

Check out other analyst stock ratings.

Telsey Advisory Group On Amazon

Analyst Dana Telsey maintained an Outperform rating, while raising the price target from $145 to $160.

Amazon reported strong results for the second quarter and better-than-expected guidance for the third quarter, Telsey said. “On the retail side, we are encouraged to see double-digit sales growth in the US and International (constant currency), as well as a sequential improvement in profitability,” she added.

“At AWS, we are encouraged to see the business stabilize as customers start to shift away from cost optimization mode toward a focus on new technologies, including generative AI,” the analyst further wrote.

Bernstein On Amazon

Analyst Mark Shmulik reaffirmed an Outperform rating, while lifting the price target from $155 to $175.

“Amazon fired on all cylinders,” Shmulik said.

“AWS finally stabilizing and now a coiled spring; Retail performance hanging in with a weakened consumer; N. American retail margins are back to pre-pandemic levels and accelerating alongside compressing fulfillment windows — impressive; and aggregate operating profits are up and to the right,” the analyst wrote.

William Blaire On Amazon

Analyst Dylan Carden maintained an Outperform rating on the stock.

“While AWS stability and improved body language underpins some support for shares here, we believe more of the upside can be attributed to improving margins in the North America segment, which suggests an ever more compelling valuation case for shares,” Carden wrote in a note.

“We see the biggest areas for long-term structural margin improvement as retail gross margins, technology and content costs, and music and video expense,” he added.

AMZN Price Action: Shares of Amazon were up 10.71% to $142.72 at the time of publication Friday.

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