On July 16, 2002, Jeff Bezos, founder and then-CEO of Amazon (AMZN) , said that the company was "putting out the welcome mat for developers."
The internet behemoth was unveiling Amazon Web Services, which the company described as "a platform for creating innovative web solutions and services designed specifically for developers and website owners."
“Developers can now incorporate Amazon.com content and features directly onto their own websites,” Bezos said in a statement. “We can't wait to see how they're going to surprise us.”
More than 20 years later, it's probably fair to say that the company is happily surprised by the growth of AWS.
During Amazon's fourth-quarter-earnings call on Feb. 1, Andy Jassy, Amazon's current CEO, told analysts that AWS revenue grew 13% year-over-year in the quarter compared with 12% year-over year in the third quarter, "and we're now approaching an annualized revenue run rate of $100 billion.
"We watched the incremental revenue added each quarter," Jassy said. "And in Q4 AWS added more than $1.1 billion of incremental quarter-over-quarter revenue, which on [a foreign-exchange-neutral] basis is more than any other cloud provider as far as we can tell."
Amazon CEO Jassy: '2023 a very significant year'
He added that "2023 also was a very significant year of delivery and customer trial for generative [artificial intelligence] or Gen AI in AWS."
JP Morgan analyst Doug Anmuth discussed AWS in a report about the internet sector.
Anmuth said he remained positive overall on the sector heading into the first-quarter-earnings reports.
The analyst says investor sentiment is generally constructive, with pockets of higher valuations and elevated expectations.
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Amazon remains the firm's best idea for 2024, he said, "even as it is most owned across our coverage."
"We believe Amazon is well positioned as the market leader in e-commerce and public cloud," the firm said.
Anmuth said he expected Amazon Web Services to excel in the first quarter and for the full year.
"We believe Amazon’s flexibility in pushing first-party vs. third-party inventory and the Prime membership serve as major advantages in its Stores business, and its multiyear head start in the cloud has led to about 35% AWS global market share," he said.
In addition, the analyst is looking for strong stores growth; expanded North American operating-profit margin; improved international profit, and cost discipline, all of which support a multiyear ramp in free cash flow.
Anmuth said easing optimizations, new workload deployment, favorable comparisons, and very early generative-AI monetization should support AWS through 2024.
The analyst projected 6.1% North America operating-profit margin in 2024, with room for upside via regionalization, inventory placement, and inbound-shipping optimization, along with advertising.
Analyst expects Amazon shares to rise
Amazon is scheduled to report first-quarter earnings on April 25. Analysts surveyed by FactSet are estimating the company earned 83 cents a share on $142.6 billion in revenue.
A year earlier, Amazon earned 31 cents a share on $127.4 billion.
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Roth MKM analyst Rohit Kulkarni affirmed a buy rating and $205 price target on Amazon, while noting that the investment firm's recent discussion with a 25-year veteran in e-commerce suggested that the company still has significant supply-chain efficiencies to tap into.
The firm hosted a webinar with this industry veteran, who said Amazon would continue to tweak its regional-distribution model and grow shipping efficiency. This veteran said Amazon still has more than 20% of efficiencies left to gain, the analyst said.
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Stifel analyst Mark Kelley raised the firm's price target on Amazon to $224 from $200, while reiterating a buy rating on the shares, "as we expect [the] shares to continue towards the high end of its valuation range over the last two years."
"Sentiment for our group has been mixed since the start of 2024, although positioning has somewhat shifted around, with positive sentiment still mostly concentrated around the large- and megacaps," the analyst said in a group preview note.
The firm's thoughts at the start of first-quarter earnings season are "largely unchanged" from the start of the year, namely that the advertising environment continues to improve, e-commerce continues to "hang in there," and subscription names "remain a mixed bag."
"The wild card this quarter stems from the potential for subdued qualitative commentary as the Middle East situation worsens (perhaps we hear of brand spend pauses)," Kelley said.
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