BMO raises 2Q24 AWS growth rates to a Street high of 19%

BMO Capital Markets hiked its second-quarter Amazon Web Services (NASDAQ:) growth rates from 17.8% to 19%, or $26.3 billion, marking a new Street high.

Citing channel checks, analysts said AWS’s Q2 growth could exceed 22%.

“With greater visibility following Google results, we monitor the incremental nominal dollar difference between GCP and AWS since 2018 and are comfortable at +19%,” analysts said in a report.

“As companies invest to stay competitive, we believe AWS is on a sustainable revenue growth trajectory through at least 2025.”

Moreover, BMO estimates that Prime Day volume grew by nearly 20% year-over-year. Analysts attribute the doubling of SMB/independent unit volume during Prime Day—from 100 million to 200 million in two years—to faster delivery speeds and increased supply levels.

This led to a 14% year-over-year increase in items delivered same-day or next-day, resulting in higher customer frequency and greater incremental margins due to fewer advertisements and promotions.

To account for a more positive outlook, analysts have revised their operating income estimates for Q2 2024, 2024, and 2025 to $13.9 billion, $61 billion, and $71 billion, respectively, up from the previous estimates of $12.7 billion, $59 billion, and $68 billion.

In addition, analysts have adjusted their AWS CAPEX estimates for 2024 and 2025 to $48 billion and $52 billion, respectively, from the prior estimates of $44 billion and $48 billion.

“Upward revisions are attributable to incremental AI workloads and to a lesser extent, higher Retail CAPEX,” analysts noted.

Amazon is set to release its earnings on August 1 following the stock market’s close. The tech giant is expected to report earnings per share (EPS) of $1.01 and revenue of $148.54 billion, having surpassed estimates in the previous quarter.