Amazon stock (AMZN) surged by as much as 5% in after-hours trading on Thursday following the company’s third-quarter earnings report, which revealed revenue and earnings per share that exceeded Wall Street's expectations.
 

Amazon Q3 earnings

Amazon reported adjusted earnings of $1.43 per share on sales of $158.9 billion for the quarter ending in September. This performance surpassed analysts' expectations, which had forecasted adjusted earnings of $1.14 per share on sales of $157.3 billion, according to FactSet.

For the upcoming quarter, Amazon is projecting sales of $185 billion at the midpoint of its guidance. While analysts had estimated December-quarter sales at $186.3 billion, the company's forecast for operating income of $18 billion significantly outpaced the $17.3 billion that analysts were anticipating, as per FactSet consensus.

Amazon demonstrates that rapid growth and substantial scale can coexist, challenging the conventional belief surrounding the law of large numbers. The company's revenue, which stood at $265.5 billion five years ago, has more than doubled to $620.1 billion in the past year, resulting in an impressive annualized growth rate of 18.5%.

Furthermore, Amazon's growth during this period outpaced that of its megacap competitors, with Alphabet at 17%, Microsoft at 14.4%, and Apple at 8.3%. This performance is significant for investors, as such comparisons often serve as a foundation for their valuation assessments.
 

Amazon stock rallied more than 3%

Before releasing its earnings, Amazon's stock was approximately 7% below a buy point of 201.20, which is based on a consolidation pattern, according to MarketSurge. This buy point reflects a record high that Amazon achieved in early July before experiencing a pullback that month.

Amazon currently has a Relative Strength Rating of 75 out of a maximum of 99, indicating that it has outperformed 75% of stocks in IBD's database over the past year. IBD suggests targeting stocks with an RS Rating of at least 80.

According to the IBD Stock Checkup tool, Amazon holds an IBD Composite Rating of 92 out of 99. This score is a combination of five proprietary ratings, and top growth stocks typically have a Composite Rating of 90 or higher.

Amazon alleviated concerns with its guidance during its earnings report on Thursday. There was speculation that the company might underperform regarding its operating income forecast. However, Amazon provided an optimistic outlook, projecting operating income between $16.0 billion and $20.0 billion, surpassing the consensus estimate of $17.3 billion.

Following the report, Amazon's stock rose 4% in after-hours trading. The results also included stronger-than-expected overall revenue and earnings, along with solid performance from the AWS cloud business.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.