Why Amazon Surged 11.5% in November

Shares of Amazon (NASDAQ:AMZN) rallied 11.5% in November, according to data from S&P Global Market Intelligence.

Amazon's strong performance came on the heels of its third-quarter earnings report, which was delivered the evening of Oct. 31, setting up an exciting month that contained more product and partnership announcements.

A busy November for both sides of Amazon's empire

In the third quarter, Amazon grew revenue 11% to $158.9 billion, with earnings per share of $1.43. Both figures beat analyst expectations. Management also guided for between 7% and 11% growth for the fourth quarter with an eye-opening 36% rise in operating income, projecting more margin improvements that have propelled the stock all year.

What really stood out this quarter was the Amazon Web Services cloud computing segment. Even at a $102 billion revenue run-rate, AWS accelerated its growth rate to 19%, up from 12% in the year-ago quarter, while operating margins expanded from 30.3% to 38.1% over that time.

The acceleration and margin expansion indicated enterprises are back innovating on AWS after a couple of years of cost-cutting. It may also have indicated that Amazon is getting its fill of generative AI workloads, and that those workloads are coming in at high margins.

Image source: Getty Images.

The good news continued throughout the month, with announcements on both the AWS and e-commerce sides of the business.

Amazon has invested in the generative AI start-up Anthropic as its main AI partner, and Anthropic made an exciting partnership announcement in November with AI software darling Palantir to provide Anthropic's Claude models to U.S. defense agencies. The clearing of Claude for highly sensitive workloads requiring "maximum protection" for the Defense Department seemed to validate Anthropic's capabilities.

Additionally, AWS announced a large five-year $475 million deal to provide IBM with Nvidia chips for artificial intelligence training. AWS is fairly popular among start-ups and tech companies, but IBM is fairly embedded in large traditional enterprises, perhaps giving AWS entry into these large company workloads.

On the e-commerce side, Amazon launched "Haul," a new store that sells bargain-priced items under $20. The new store is similar to China's Shein and Temu e-commerce stores that have been gaining favor with American consumers in recent years. Some investors had been worried about this low-priced competition, but the announcement was well received, as it showed Amazon taking those competitors head-on.

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Amazon has actually been somewhat of a laggard among Magnificent Seven stocks over the past couple of years, as some feared Amazon may have fallen behind in artificial intelligence, with others noting the rise of these China e-commerce entrants. However, this month appeared to reassure investors on both of those fronts.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Billy Duberstein and/or his clients have positions in Amazon. The Motley Fool has positions in and recommends Amazon, Nvidia, and Palantir Technologies. The Motley Fool recommends International Business Machines. The Motley Fool has a disclosure policy.