EB SECURITIES: Amazon.com, Inc. (AMZN.US) accelerated its growth in AWS in the third quarter, with AI e-commerce driving revenue growth.

EB SECURITIES released a research report stating that after the market closed on October 30, Eastern Time, Amazon.com, Inc. (AMZN.US) announced its Q3 performance. As of 8:00 on October 31, Beijing time, Amazon.com, Inc.'s stock price increased by 13.16% after hours. Considering the easing of data center capacity constraints, accelerated growth in AWS revenue exceeding expectations, incremental performance from internal circulation advertisements and AI shopping assistants, the revenue forecasts for 2025-2027 were revised to $701.0/ $777.0/ $861.1 billion (compared to the previous forecast +1.0%/+1.4%/+0.5%), taking into account the stable foundation of the e-commerce business and the emerging scale effects of the previous distribution network construction, driving profit release. The net profit forecasts for 2025-2027 were revised to $67.0/ $83.1/ $101.7 billion (compared to the previous forecast +1.3%/+1.1%/+0.7%), corresponding to PEs of 35x/28x/23x, maintaining a "buy" rating. EB SECURITIES' main points are: Event: After the market closed on October 30, Eastern Time, Amazon.com, Inc. announced its Q3 performance. As of 8:00 on October 31, Beijing time, Amazon.com, Inc.'s stock price increased by 13.16% after hours. Q3 revenue exceeded expectations, while Q4 operating profit guidance was slightly below expectations. In Q3, Amazon.com, Inc.'s net sales were $180.17 billion, a year-on-year increase of 13.4% (compared to 13.3% in the previous quarter), higher than the Bloomberg consensus expectation by 1.32%; operating profit was $17.42 billion, lower than the consensus expectation by 11.7%, mainly due to one-time expenses; operating profit margin was at 9.7%, a year-on-year decrease of 1.3 percentage points; net profit was $21.18 billion, EPS was $1.95, exceeding the consensus expectation by 25.3%. Q4 net sales guidance is $206-213 billion (median exceeding consensus by 0.3%), a year-on-year growth of 9.7%-13.4%; operating profit guidance is $15.5-20.5 billion (median below consensus by 1.7%), a year-on-year growth rate of -1%-22.6%. Q3 AWS revenue accelerated growth, and the operating profit margin rebounded. In Q3, Amazon.com, Inc.'s AWS revenue was $33 billion, a year-on-year increase of 20.2% (compared to 17.5% in Q2), with an AWS operating profit margin of 34.6%, an increase of 1.7 percentage points quarter-on-quarter, and a decrease of 3.4 percentage points year-on-year. According to the Q3 conference call, the current self-developed chip Trainium2 has orders exceeding supply, with revenue scale reaching billions of dollars, a quarter-on-quarter growth of 150%. It is expected that Tranium3 services will migrate from large customers to small and medium-sized customers, opening up market space. Q3 operating profit margin of the e-commerce department declined. In addition to AWS, in other businesses, the operating profit in the North American region was $4.79 billion, with an operating profit margin of 3.3%; international operating profit was $1.2 billion, with an operating profit margin of 2.9%. The operating profit margins in North America and internationally declined both year-on-year and quarter-on-quarter, mainly affected by one-time legal settlement and job-cutting costs. According to the Q3 conference call, the active users of AI e-commerce assistant Rufus has reached 250 million, with a monthly increase of 140%, expected to achieve annual sales of over $10 billion in the future. Capital expenditure continues to grow, with some easing of production constraints, while the current bottleneck is still electricity. Amazon.com, Inc.'s capital expenditure (TTM) was $115.9 billion in Q3, a year-on-year growth of 77.1%, with cash capital expenditure of $34.2 billion. According to the Q3 conference call, the full-year cash capital expenditure for 2025 is expected to reach $125 billion, a 60% year-on-year increase, with continued increases in 2026, and overall capacity is expected to double by the end of 2027. Management believes that the current production bottleneck still lies in electricity and may move to chips in the future. Profit forecasts, valuation, and ratings: Considering the easing of data center capacity constraints, accelerated growth in AWS revenue exceeding expectations, incremental performance from internal circulation advertisements and AI shopping assistants, the revenue forecasts for 2025-2027 were revised to $701.0/ $777.0/ $861.1 billion (compared to the previous forecast +1.0%/+1.4%/+0.5%), taking into account the stable foundation of the e-commerce business and the emerging scale effects of the previous distribution network construction, driving profit release. The net profit forecasts for 2025-2027 were revised to $67.0/ $83.1/ $101.7 billion (compared to the previous forecast +1.3%/+1.1%/+0.7%), corresponding to PEs of 35x/28x/23x, maintaining a "buy" rating. Risk warnings: Macroeconomic performance lower than expected, uncertainty in tariff policy, and slower-than-expected progress in commercializing AI.