Amazon's AWS Growth and Prime Day Performance: Jefferies' Q2 Expectations

Amazon.com Inc (NASDAQ:AMZN) is well-positioned heading into its second-quarter earnings report, according to Jefferies, which highlights strong momentum in AWS growth and resilient Prime Day spending. The e-commerce and cloud computing giant is benefiting from increased consumer spending during Prime Day, accelerating AWS backlog growth, and a valuation that Jefferies views as attractive. The firm's proprietary survey of 685 consumers shows Prime members continued to increase spending despite inflationary pressures, with 54% of returning participants reporting year-over-year increases of more than 10%. Amazon remains the preferred shopping destination for many, and 25% of respondents noted they use the platform more to seek value amid rising prices. AWS is the key growth driver, with backlog growth expected to accelerate from the 93% YOY increase reported in Q1 and approach $500 billion. Jefferies forecasts AWS revenue growth of approximately 32% in Q2, exceeding investor expectations of over 33% compared to Q1's 28%. Key indicators supporting AWS demand include Anthropic's expanded cloud commitment, recent EC2 price increases, and growing demand for AI inferencing workloads. Valuation-wise, Amazon trades at around 12x EV/EBITDA, below Alphabet (17x) and Walmart (19x), and below its own 10-year average multiple. Shares are up about 7% year-to-date at $247, reflecting a more attractive entry point after a 7% decline since Q1 results. Jefferies maintains a favorable risk-reward profile supported by improving AWS fundamentals and resilient retail performance. Looking ahead, investors will watch capital expenditure guidance, free cash flow, and the impact of Prime Day shifting into Q2, which could create more challenging retail comparisons in Q3.

Jefferies' analysis suggests Amazon is poised for a significant turnaround in Q2, driven by AWS's supercharged growth and Prime Day's resilient performance. The approach to $500 billion in AWS backlog reinforces the company's leadership in cloud computing. However, the shift of Prime Day into Q2 could introduce challenges for retail comparisons in Q3, making it a critical factor in evaluating Amazon's future growth prospects.