Amazon Stock Pops, Driven by AWS. Is It Too Late to Buy?

Amazon (AMZN 0.61%) shares popped following its third-quarter results, which were once again powered by its cloud computing segment AWS. The stock is now up more than 25% on the year.

Showing the fickleness of the market, AWS' growth in Q3 was virtually the same as Q2, when the stock sold off on the news, but investors were much more upbeat after its Q3 report. Let's take a closer look at Amazon's most recent results to see whether it is too late to buy the stock.

AWS powers growth

AWS was once again the big story at Amazon, as revenue soared 19% for its cloud computing segment to $27.5 billion. The segment's operating income, meanwhile, surged nearly 49% from $7 billion to $10.4 billion. This is a high fixed-cost business with a lot of operating leverage, and the increase in revenue helped push operating margins to an all-time high for the unit.

Amazon said that its AWS AI revenue, meanwhile, grew by triple digits. It said it sees generative AI as a "once-in-a-lifetime opportunity." The company will spend $75 billion in capital expenditures (capex) this year to help capture this opportunity, and it plans to spend even more in 2025.

The company also touted the significant interest it is seeing for its custom AI chips: Trainium for training, and Inferentia for inference. It said it has had to go back to its manufacturing partners multiple times to produce more chips than it originally expected. Amazon also said it is seeing organizations standardize their AI model, building on its SageMaker product.

On the consumer side of its business, Amazon's North American sales increased 9% to $955.5 billion, while international sales rose 12% to $35.9 billion. Operating income for its North American segment jumped 33% to $5.7 billion, while its international segment posted operating income of $1.3 billion versus a small loss a year ago.

Advertising services once again led the way, with 19% revenue growth to $14.3 billion. The company said sponsored ads were performing very well on a large base, while it's entering its first broadcast season for Prime Video advertising. Subscription service revenue, meanwhile, rose 11% to $11.3 billion.

Third-party seller services revenue climbed 10% to $37.9 billion. Online stores grew revenue by 8% to $61.4 billion, while physical stores revenue rose 5% to $5.2 billion.

Overall, Amazon recorded 11% revenue growth for the quarter to $158.9 billion, which came in just ahead of the $157.2 billion analyst consensus, as compiled by LSEG. Adjusted EPS soared 52% to $1.43 and came in well above analyst expectations of $1.14.

Amazon generated $112.7 billion in operating cash flow in the quarter and $47.7 billion in free cash flow.

Is it too late to buy Amazon stock?

Amazon's AWS segment continues to put up strong revenue growth and show a lot of operating leverage, leading to even stronger operating income growth. AI is leading the way, and the company continues to invest to keep up with increasing demand for its AI services.

Meanwhile, it is profiting from AI is a variety of ways, from cloud computing to large language model (LLM) services with SageMaker and Bedrock to its own custom AI chips in Trainium and Inferentia. It is also bringing AI to its consumer business by helping with recommendations, making it easier for third-party sellers to list items, and for optimizing its logistic network.

The company's advertising business is also showing strong growth, led by sponsored product ads. In addition, it is adding more advertising to its Prime Video service, and a deal with the NBA to stream games next season will likely be a growth driver for its ad business in 2026.

Amazon currently trades at a forward price-to-earnings (P/E) ratio of nearly 32.5, based on 2025 analyst estimates. That's below where it has traded from a historical P/E level.

AMZN PE Ratio (Forward 1y) data by YCharts

Amazon has never been afraid to spend money to win. This has led it to become the largest e-commerce, logistics, and cloud computing company in the world. With the company having its sights on being an AI winner and willing to spend money to get there, I'd be a buyer of the stock, given its strong history of execution.