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AWS revenue growth trough “seems near” the analysts said in a client note.
“Google (NASDAQ:GOOGL) searches & Reddit data show strong interest for AWS AI offerings,” they wrote.
Nvidia’s (NASDAQ:NVDA) historic print also bodes well for Amazon as AWS and NVDA Data Center revenues correlate ~98% back to 2017.
“The NVDA print arguably represents a historic demand shift toward AI compute with a seemingly long runway for growth,” the analysts added.
On the other hand, they also highlighted that Snowflake’s (NYSE:SNOW) recent earnings report shows optimizations continue.
“Optimizations continue across cloud providers and SNOW is closely aligned with AWS. Customer vertical exposure may be at play. Also, GPU pricing data for AWS looks relatively uncompelling in a competitive market,” the analysts added.
Overall, Piper Sandler remains bullish on Amazon on the improving outlook for AWS.
“While optimizations may persist near-term, 3Q represents a year since the ‘optimization’ cycle began. Backlog growth held steady in 1Q. We have modestly raised our 2024E AWS revenue estimates & make modest tweaks to margins. Street Retail estimates look conservative to us and imply FY24 operating margins well below pre-COVID. We like the setup & see improving trends at AWS & Retail,” the analysts concluded.
Amazon shares are down 0.4% in premarket Wednesday.
