Mizuho analyst James Lee reiterated a Buy rating on Amazon.Com, Inc
Lee recently completed his quarterly AWS sales channel monitor with a leading partner.
KPIs such as sales cycle, price concession, and consumption remained stable after a meaningful improvement last quarter. Furthermore, spending growth remained stable with reinvestment from cost optimization into Gen-AI and cloud migration.
However, early FY24 budget processes indicate acceleration into next year due to a strong pipeline of large-scale migration.
The pipeline was robust for regional banks to access the latest risk management technologies in the cloud to limit interest rate risk and the deposit flight they faced in the first half of the year.
With the group moving to the cloud for the first time, Lee sees significant revenue opportunities at $25 billion per year over the next 5 years, which could add 5 points of growth rate incrementally over the next two years.
Concurrently, budgetary decisions are made at the top, so incremental spending is strategic and less likely to be impacted by interest-rate volatility.
With that, Lee is incrementally confident about AWS revenue acceleration into FY24 and maintained AMZN as his top pick.
Lee's checks indicate that AWS revenue growth will likely be stable in 3Q23, with easy comps in 4Q23, consistent with consensus.
However, the upside could be limited in the back half due to FY24 budget planning and the complexity of Gen-AI.
Lee expects cloud migration to pick up in FY24 and is incrementally confident about AWS revenue acceleration forecast into FY24 at 20% YoY growth.
This trend also affirmed our thesis that Gen-AI drives the next super-cycle of workload migration. Our conviction is based on the cloud platform's strength in data warehousing, which stands to benefit from accelerated cloud migration, The analyst writes.
Lee projects 3Q revenue of $141.39 billion vs. consensus of $141.5 billion and EPS of $0.62 vs. consensus of $0.58. He estimates Q4 revenue of $170.44 billion vs. consensus $166.68 billion and EPS of $0.73 vs. consensus $0.66.
Lee estimates FY23 revenue of $573.58 billion vs. consensus $569.83 billion and EPS of $2.31 vs. consensus $2.2.
Price Action: AMZN shares closed lower by 3.66% at $124.72 on Tuesday.
