Shares of Amazon (AMZN 3.01%) were up 8% as of 10:08 a.m. ET on Friday following a better-than-expected business update.
Amazon's online stores and cloud business are showing improving revenue trends after slower growth hit the company in 2022. Overall, sales were up 13% year over year to $143 billion, while Amazon's operating profit jumped to $11.2 billion, up from $2.5 billion in the year-ago quarter.
Why investors loved Amazon's third-quarter update
Amazon's online stores grew 6% year over year, representing the third consecutive quarter of accelerating growth. The e-commerce leader is benefiting from investments to speed up delivery and gain more efficiency by moving to a single national fulfillment network.
One of the biggest concerns on Wall Street has been Amazon's cloud services business, which posted a revenue increase of 12% year over year that was consistent with the previous quarter. Alphabet spooked investors earlier this week by reporting weakening growth in Google Cloud, which analysts worried might lead Amazon to report disappointing cloud growth, but that didn't happen. Amazon's investments in artificial intelligence tools should lead to growing demand in the years to come.
Amazon's momentum could push the stock higher
Amazon could have a big fourth quarter with online sales. CEO Andy Jassy noted the results from its gains in fulfillment efficiency are exceeding the most optimistic expectations. Faster delivery speeds should lead to higher customer satisfaction, and therefore, more orders through the holiday season. The only thing that could hurt Amazon's momentum now would be a worsening economy.
The stock is up 54% year to date but is still trading off its previous highs. Amazon is clearly starting to turn the corner after a tumultuous year that saw higher costs and slower sales growth send the stock down. With those issues behind it, the stock could have more upside in 2024.
