Amazon's Best Quarter in Years: Is AMZN a Buy Now?

Amazon (AMZN) just reported its best quarter in years, with revenue growth accelerating to 20% in Q2—the fastest pace in five years. This marks a significant turnaround from the low-teens growth seen over the past few years.

The acceleration was broad-based: North America sales rose 16% to $116.2 billion, international sales grew 15% to $42.2 billion, and AWS revenue surged 37% to $42.2 billion, its fastest growth since 2021. The AI boom is a key driver for AWS, and Amazon expects momentum to continue, forecasting $200 billion in capital expenditures, mostly for data centers and AI compute.

Advertising also accelerated to 26% growth, its strongest since 2023, and operating income jumped 43% to $27.5 billion, showing improved operating leverage. The shift of Prime Day to Q2 added roughly 400 basis points to overall revenue growth, but underlying momentum is clearly strong.

Despite the strong report, Amazon stock spiked to an all-time high but has since given back most of those gains, seemingly due to rising interest rates and broader macro concerns. Management guided Q3 revenue growth to slow to 9%-12%, or 13%-16% adjusted for the Prime Day shift, but Amazon's guidance is often conservative.

Amazon's reacceleration is a big deal because it shows the company is firing on all cylinders after a period of slower growth. The surge in AWS is particularly important, as cloud computing is a high-margin, recurring revenue business that drives profitability. With AI demand exploding, AWS is well-positioned to capture significant growth, and its 37% growth rate—while still trailing Microsoft Azure and Google Cloud—demonstrates that the overall cloud market is expanding rapidly.

The advertising segment's 26% growth is also a positive, as advertising is a high-margin business that boosts overall profitability. The 43% jump in operating income shows that Amazon is gaining operating leverage, meaning it can grow profits faster than revenue.

From a valuation perspective, Amazon's stock is trading at a similar P/E ratio to the S&P 500 when normalizing for equity gains from Anthropic. Given its diversified business, wide economic moat, and exposure to AI, that valuation looks attractive. The recent pullback may be a buying opportunity, especially if the company continues to execute well.

However, investors should be aware of risks: rising interest rates could pressure high-growth stocks, and competition in cloud and AI is intense. Also, the Prime Day shift boosted Q2 results, so Q3 growth may appear slower. But overall, Amazon's momentum is strong, and the long-term outlook is promising.