Amazon Earnings: AWS Accelerates and Margins Continue to Outperform

We are raising our fair value estimate for wide-moat Amazon to $193 per share from $185 previously, after it reported good first-quarter results. The company’s second-quarter outlook was shy of our aggressive estimates, while it noted plans to materially increase data center investments in 2024 to meet generative AI demand. Changes to our model are modest but center around continued profitability enhancements. Many positive trends from the last several quarters continued with notable improvement in AWS demand and additional cost savings arising from fulfillment and cost to serve. Strong quarterly performance has pushed the shares meaningfully higher over the last year, and as such, we see only a modest upside to our fair value for investors.