Amazon.com's (AMZN) Amazon Web Services segment remains the key focus for investors in Q3, with growth expected at around 18% year over year, potentially accelerating in late 2025 and into 2026 as new capacity under "Project Rainier" comes online, UBS Securities said in a report Tuesday.
The investment bank raised its price target on Amazon to $279 from $271 ahead of the company's Q3 earnings report on Oct. 30, maintaining a buy rating on expectations of long-term upside in e-commerce, cloud, advertising, and satellite operations, the report said.
"We anticipate some noise in the 3Q25 reported operating income," UBS said, adding that Amazon's operating income is expected to remain within its $15.5 billion to $20.5 billion guidance range despite a $2.5 billion Federal Trade Commission settlement, though headline guidance could dip below consensus if the charge is booked in Q4.
Analysts at UBS expect that the e-commerce company could see faster gross merchandise value growth and market share gains as the company expands "one- and same-day Prime delivery," while AWS growth is expected to accelerate as "capacity constraints" and other headwinds ease, the report said.
UBS also projected margin improvements in e-commerce from better "unit economics" and pointed to Prime Video's ad-supported tier as a "meaningful contributor over time," according to the report.
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