Amazon’s outlook revised to positive by Moody’s Ratings

Amazon’s outlook revised to positive by Moody’s Ratings

  • 18.03.2025 14:17
  • investing.com
  • Keywords: Amazon, Moody's Ratings

Moody’s upgraded Amazon’s credit outlook to positive, driven by strong cash flow and operational improvements. The ratings affirmation highlights AWS's profitability and Amazon’s leadership in online retail and cloud computing.

Amazon Services
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Amazon.com Inc

Positivesentiment_satisfied
Analyst rating: N/A

Revised outlook from stable to positive by Moody’s, confirmed ratings for senior unsecured notes and commercial paper program. Improved operational performance leading to free cash flow generation supporting capital spending. Strong brand in online retail and cloud computing with AWS. Profitability from advertising and third-party sellers. Expansion of AI investments.

Whole Foods Market

Positivesentiment_satisfied
Analyst rating: N/A

Outlook revised to positive, ratings confirmed. Owned by Amazon.

Context

Amazon’s Outlook Revised to Positive by Moody’s Ratings

Key Facts and Data Points:

  • Outlook Revision: Moody’s Ratings upgraded Amazon.com Inc.'s outlook from stable to positive.
  • Rating Affirmation: The A1 senior unsecured notes ratings and Prime-1 commercial paper program ratings were confirmed.
  • Whole Foods Market: Its outlook was also revised to positive, with its A1 senior unsecured notes rating affirmed.

Operational Performance:

  • Free Cash Flow (FCF): Amazon has generated significant FCF, enabling increased capital spending while maintaining low leverage and high cash balances.
  • Credit Metrics: As of December 31, 2024, RCF/Debt stood at 81.6%.

Strategic Investments:

  • AWS Growth: Capital spending is accelerating to meet growing cloud demand, with a focus on AI capabilities.
  • Liquidity: Amazon holds over $78 billion in cash and cash equivalents, supported by a $20 billion commercial paper program (no borrowings as of December 31, 2024).

Financial Strength:

  • Operating Income: Improved significantly due to enhanced productivity and reduced per unit costs from regionalized fulfillment.
  • Advertising Revenue: Generates a solid and growing profit stream.

Market Position:

  • Online Retail Leader: Amazon’s global brand strength and dominance in online retail remain unchallenged.
  • Cloud Computing: AWS continues to benefit from increased demand for cloud and AI services, solidifying its market leadership.

Competitive Dynamics:

  • Future Challenges: Potential competition from brick-and-mortar retailers expanding online and larger tech companies in the cloud market.
  • AI Growth: Amazon is well-positioned to capitalize on growth in generative AI.

Financial Strategy:

  • Conservative Approach: Moody’s expects Amazon to maintain conservative financial strategies, focusing on capital investments for AWS growth.
  • Rating Upgrade Potential: Could occur with consistent profit growth, stable margins, strong liquidity, and positive FCF.
  • Downgrade Risks: Possible if operating performance weakens, investments fail to yield returns, or financial strategy becomes more aggressive.

Long-Term Implications:

  • Stability and Growth: Amazon’s strong credit metrics and liquidity position it well for long-term growth in AI and cloud computing.
  • Regulatory Environment: No specific regulatory risks mentioned, but continued focus on financial stability is key.