03:05 PM EDT, 11/01/2024 (MT Newswires) -- Amazon.com ( AMZN ) could see operating margins at its cloud-computing business peaking in 2024 after hitting a new high in the third quarter, BofA Securities said in a note e-mailed Friday.

Late Thursday, the e-commerce giant posted third-quarter results that surpassed Wall Street's estimates amid double-digit revenue gains for the Amazon Web Services cloud-computing unit and its advertising business. AWS margins reached a new high at 38%, BofA said in a note to clients.

"We increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year over year in (the third quarter)," Amazon ( AMZN ) Chief Financial Officer Brian Olsavsky said on an earnings conference call late Thursday, according to a Capital IQ transcript.

The company projects 2024 capital expenditures at roughly $75 billion, Chief Executive Andy Jassy said on the call. "I suspect we'll spend more than that in 2025. And the majority of it is for AWS."

Third-quarter AWS sales jumped 19% annually, though investors were looking for roughly 20% growth, according to BofA. "Despite this, we think AWS' $1.2 (billion) in (quarter-on-quarter) revenue dollar growth will compare well to competitors," BofA analyst Justin Post said.

Amazon ( AMZN ) will increase 2024 CapEx by $27 billion from last year, with higher related depreciation to be a headwind to AWS margins, Post wrote. "We expect AWS margins to peak in 2024, and could migrate back toward 30% over time." The company expects higher CapEx spending next year due to AWS and artificial intelligence-related expenditures, according to the note.

Amazon's ( AMZN ) AI is a "multibillion-dollar" business, Jassy told analysts. "It's growing triple-digit percentages year-over-year, and it's growing 3x faster at its stage of evolution than AWS did itself."

Amazon ( AMZN ) expects fourth-quarter operating income between $16 billion and $20 billion. The upper-end of the range is "a positive" given that the three-month period typically has lower margins and profits in guide, Post said. "Inbound efficiencies are helping drive retail margins higher, while AWS is being driven by strong capacity utilization and cost measures," the analyst wrote. "Management suggests inbound facility efficiencies are just starting, and suggested international retail margins could move toward North America."

Amazon ( AMZN ) shares were up 6.3% in Friday late-afternoon trade. The stock has risen roughly 30% so far this year.

BofA raised its 2025 EPS outlook to $6.13 from $5.59, while revenue is now seen at $707.08 billion, up from the previously projected $700.9 billion.

The brokerage increased its price objective on the Amazon ( AMZN ) stock to $230 from $210 while reiterating its buy rating.

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