Amazon's Cloud Is No Longer "Lagging": AWS's 3-Year High Reacceleration Sparks Biggest Stock Surge in 3 Years

TradingKey - Contrary to the prevailing market narrative of “falling behind in AI cloud,” Amazon Web Services (AWS) is now growing at its fastest pace in three years, reaffirming its position as the world’s leading cloud infrastructure provider. 

Fueled by a powerful rebound in AWS — which contributes over 65% of operating profit while accounting for less than 20% of revenue — Amazon’s stock surged toward its biggest single-day gain in three years.

On Thursday, October 30, after market close, cloud and e-commerce giant Amazon (AMZN) reported its Q3 2025 earnings, beating expectations across net sales, net income, and most notably, its profit engine: AWS. 

Shares jumped over 13% in after-hours trading — on track to deliver the company’s largest daily gain since February 2022 if sustained into Friday’s session.

Earnings Beat Across the Board

• Revenue: $180.17 billion, up 13% YoY — above consensus of $177.8B
• EPS: $1.95, well above the expected $1.57

Crucially:

• AWS Revenue: $33.0 billion, up 20% YoY — exceeding forecasts of $32.42B (+18.1%)
• AWS accounted for 18.32% of total revenue, but contributed 65.63% of operating profit

This performance marks a decisive reversal from recent concerns that Amazon was losing ground in the AI-driven cloud race.

The “AI Laggard” Narrative Unravels

Ahead of the report, Wall Street had grown skeptical of AWS, especially after Q2 growth lagged far behind Google Cloud (+32%) and Microsoft Azure (+39%).

Despite maintaining its ~30% share of the global cloud market, this “growth anxiety” weighed heavily on Amazon’s stock — making it the worst performer among the Magnificent Seven and underperforming the S&P 500 YTD.

William Blair analysts noted before the earnings that Amazon is fighting a perception that it fell behind in the early stages of the AI revolution. This narrative capped investor optimism and suppressed valuation.

The Cloud King Is Back

Now, Amazon’s Q3 results are reasserting its leadership.

CEO Andy Jassy said that Q3 marked AWS’s fastest growth rate since 2022 — accelerating to 20.2% YoY.

He added:

“We continue to see strong demand in AI and core infrastructure, and we’ve been focused on accelerating capacity — adding more than 3.8 gigawatts in the past 12 months.”

Evercore ISI highlighted that 20% YoY growth is AWS’s fastest in 11 quarters. The firm also noted a key relief for investors: custom chip sales — particularly Trainium AI training chips, which saw a 150% sequential increase in revenue.

“The AI narrative has flipped positive for AWS,” Evercore said.

Wedbush echoed this sentiment. It believes confidence in management’s AI leadership has been restored, thanks to accelerating AWS growth and optimistic guidance.

As TradingKey previously noted, capacity constraints were seen as AWS’s biggest bottleneck. Now, Amazon is proving it has both the financial strength and strategic resolve to scale AI infrastructure — a major bullish signal.

CFO Brian Olsavsky said:

• Q3 capex rose 61% YoY to a record $34.2 billion — above the $31.5B forecast
• Full-year 2025 capex guidance raised to $125 billion, above the $118.76B consensus
• Capex expected to grow further in 2026

Jassy added that AWS data center power capacity has doubled since 2022 — and will double again by 2027.

Growth Momentum Builds

Wedbush projects AWS growth will rise to 22% in Q4, driven by strong backlog and higher capex.

Lloyd Walmsley, Mizuho analyst, observed that management avoided using the word “accelerate,” but still expects AWS growth to reach 21% in Q4.

With Amazon trading at a forward P/E of ~24x — below its three-year average of 31x — Mizuho believes the stock is poised for a meaningful rebound.

S&P Global noted that the strong performance of Amazon’s cloud business and its core retail business likely reassured investors worried that the company was spending too much money pursuing what some have suggested is an AI bubble.

“It doesn’t feel bubbly to me. It just feels like a business firing on all cylinders.”

As of October 30, Amazon shares are up 1.58% YTD, though down about 5% over the past three months.