Amazon Stocks Edged Higher as TD Cowen Reaffirms AWS Growth

This article first appeared on GuruFocus.

Amazon, the commerce and cloud-computing company (NASDAQ:AMZN), retained TD Cowen’s Buy rating on its AWS growth outlook, with shares at $251.619 on October 5, edged a bit higher from Friday’s close. The bullish case has muscle: cloud demand is growing fast. But investors still need that growth to translate into cash.

Amazon’s second-quarter results showed AWS revenue climbing 37% to $42.2 billion, with operating income reaching $16.6 billion. That puts the cloud division’s operating margin near 39.3%. The spending bill is hefty, too. Purchases of property and equipment, driven primarily by AI investment, pushed trailing twelve-month free cash flow to a $7.6 billion outflow.

The valuation picture shows shares just 0.58% above the $250.18 GF Value estimate, suggesting little discount against that benchmark. AWS has already demonstrated strong profitability. The next test is whether Amazon can fill its expanding data centers quickly enough to rebuild free cash flow. More capacity creates room for growth. Turning that capacity into paying workloads is what makes the spending worthwhile.