By Rashika Singh and Deborah Mary Sophia

(Reuters) -Amazon shares jumped nearly 12% in premarket trade on Friday after strong growth at its cloud unit and a bullish sales outlook eased fears that the tech giant was falling behind rivals in the AI race.

Revenue at Amazon Web Services, the hub of the company’s recent AI investments, rose 20% in the third quarter, compared with Microsoft Azure’s 40% and Google Cloud’s 34%.

However, analysts said the rebound marked a potential turning point for Amazon.

The company’s $33 billion in quarterly cloud revenue is more than double of Google’s $15.16 billion.

“There was definitely concern about AWS losing market share to Microsoft Azure and Google Cloud,” said Jed Ellerbroek, portfolio manager at Argent Capital.

“But now AWS is aboard the train as well and they’re seeing a big revenue increase.”

The Seattle-based company has relied on strong cloud demand to offset pressures on e-commerce as consumer spending softens amid tariff uncertainty and inflation.

Still, worries over its slower pace in winning major AI deals have weighed on the stock, up just 1.6% this year, making it the worst performer among the “Magnificent Seven.”

CEO Andy Jassy said on Thursday AWS is “growing at a pace we haven’t seen since 2022,” citing strong demand for AI and core infrastructure.

Like other Big Tech firms, Amazon also forecast increased capital spending over the next year.

Amazon’s forward 12-month price-to-earnings ratio recently stood at 29.63, surpassing Alphabet’s 25.98 but trailing Microsoft’s 31.72.

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The company’s retail and advertising businesses also delivered strong performances. Retail revenue rose 11% year-over-year, outpacing most large U.S. peers, while advertising sales jumped 24% to $17.7 billion.

“Amazon’s retail results were very good. They’re growing 11% year over year. Name me another big retailer in America growing that fast – they don’t exist,” said Jed Ellerbroek of Argent Capital.

The company has been expanding ad placements across Echo devices, grocery carts, and sponsored listings, helping boost margins and diversify revenue.

(Reporting by Rashika Singh and Deborah Sophia; Editing by Nivedita Bhattacharjee)