The Ratings Game: Amazon just taught Wall Street a new word — and it’s a good one for the bulls Inc. investors wanted to hear talk of a “reacceleration” in the company’s cloud-computing business. Instead they learned a new word.

It’s no secret that cloud-computing customers have been “optimizing” their spending lately, or looking for ways to make workloads more efficient. So how is the optimization trend playing out for Amazon

these days? It’s “meaningfully attenuating,” per Chief Executive Andy Jassy.

He dropped the “a” word — attenuate, and its derivatives — six times on Amazon’s earnings call Thursday afternoon, according to a transcript provided by AlphaSense/Sentieo. The recurrence of the term, which Merriam-Webster defines as a lessening, wasn’t lost on Wall Street analysts.

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Some even offered their own definitions. RBC Capital Markets analyst Brad Erickson titled his note to clients: “Attenuate means ‘good for AWS’ (we looked it up).”

“Management did not provide a [quarter-to-date] guide for Q4 which indicates positively for stabilization & eventual re-acceleration,” he wrote. Erickson noted that Amazon is seeing an “attenuating” pace of optimizations and a pickup in deal activity over the past few months, two things he deemed encouraging.

He rates the stock outperform with a $180 target price.

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MoffettNathanson’s Michael Morton was paying attention to the “attenuation” talk, as well.

“We learned two things from Amazon’s earnings. First, the definition of the word attenuate, and second, Amazon’s newfound outlook for the cost structure of the business. We expect the latter will lead to investors materially increasing their estimates for profitability in FY24, as did we,” he wrote.

Morton added that Jassy merely “tiptoed the line” in terms of delivering the sort of commentary on a potential reacceleration in the AWS business that investors were hoping to hear.

“For perspective, we signed several new deals in September with an effective date in October that won’t show up in any GAAP reported number for Q3, but the collection of which is higher than our total reported deal volume for all of Q3,” Jassy said on Thursday’s call.

That talk probably wasn’t enough for tactical investors, who may continue to feel reliant on third-party data about AWS trends, according to Morton, who has a buy rating and $213 target on Amazon shares.

The stock was up 6% in premarket trading Friday.

While “attenuate” was the talked-about word coming out of Amazon’s earnings call, the big number was perhaps $11.2 billion. That was Amazon’s operating income for the quarter, up from $2.5 billion a year before.

“Amazon’s Q3 operating margin was well above guidance, and unseasonably higher, due to greater efficiencies in the fulfillment network (regionalized footprint, process improvements), international margin improvement, services mix shift, and operating leverage at AWS (30% vs. 24% consensus),” Baird analyst Colin Sebastian wrote, while keeping an outperform rating on the stock and boosting his share-price target to $160 from $155.

Bernstein’s Mark Shmulik thought there were three big debates coming into Amazon’s earnings report, as investors were wondering about a possible AWS acceleration, the runway for operating income, and the competitive landscape in retail. Amazon didn’t quite settle the score on AWS, and investors were probably still left with questions about whether there’s pressure on the e-commerce business, but the profit talk was resounding, he reasoned.

“Amazon basically answered the Operating Income debate, blowing OI out of the water to record levels, and more impressively for us in the long game, six sequential quarters of operating income improvement in North America,” wrote Shmulik, who rates Amazon shares outperform, with a $175 target.

Read on: Microsoft ‘has taken the AI mantel from Google’ — and now it’s coming for Amazon in the cloud


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