Wall Street resets Amazon stock price targets on AWS AI trends

Amazon stock is down about 11% year-to-date, but Wall Street is starting to lean more bullish again.

The shift comes as AWS growth reaccelerates, driven by strong demand for AI workloads.

At the same time, Amazon’s advertising business continues to scale into a larger profit driver, giving the company a stronger long-term earnings base.

That’s what makes the stock interesting right now.

Amazon is pulling its business in two directions at once. Demand across cloud and AI is clearly strengthening, but the company is also preparing to spend heavily to support that growth.

Amazon valuation snapshot

• Market cap: $2.14 trillion
• Enterprise value: $2.20 trillion
• Share price: $201
• Analysts’ avg target price: $281 (40% implied upside)
• 2-Year expected annual EPS growth: 14.5%
• Forward P/E ratio: 25.7x
  Source: TIKR.com

AWS growth is accelerating (but so is spending)

Amazon’s AI story is pushing analysts to rethink earnings power.

Citi and JPMorgan raised their Amazon price targets from $265 to $285, pointing to faster AWS growth tied to surging AI demand.

Citi now expects AWS to grow 28%-29% in 2026, accelerating to 37% in 2027 as partnerships with Anthropic and OpenAI ramp up.

That builds on strong recent momentum. In Q4 2025, AWS revenue rose 24% year over year to $35.6 billion, which was its fastest growth in 13 quarters, while operating margin held at 35.0%.

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AWS is becoming core infrastructure for AI, with additional upside from custom chips like Trainium and Graviton, which are now generating over $10 billion in annual revenue.

CEO Andy Jassyrecently framed the long-term opportunity with AWS, saying, “I've been thinking for the last number of years that AWS, call it 10 years from now, could be about ​a $300 billion annual revenue, run rate business."

Cash flow weakens under heavy infrastructure outlays

There's no such thing as a free lunch on Wall Street. The trade-off for this strong growth has been a significant increase in capex.

Amazon is planning to spend roughly $200 billion in 2026 capital expenditures tied to AI infrastructure, chips, robotics, and satellites.

To put that in perspective, Amazon’s capex was $83 billion in 2024, up 57% year over year, and $131.8 billion in 2025, up another 59%. A move to $200 billion in 2026 would represent a 51.7% increase from 2025.

As a result of this increased spending, free cash flow for 2025 fell by 70% year-over-year, from $38.2 billion in 2024 to $11.2 billion. Meanwhile, operating cash flow rose by 20%, from $115.9 billion in 2024 to $139.5 billion in 2025.

If AWS can sustain growth above 20% while preserving strong margins, the AI buildout looks demand-led and disciplined.

If growth slows before new capacity is absorbed, that same spending could pressure returns through lower utilization, weaker incremental margins, and a longer payback period.

AI spending boom across big tech

Amazon isn’t investing in AI alone. Microsoft and Alphabet are also ramping spending as demand for large-model training and inference continues to grow. This is a capacity race, with all the major players investing heavily to meet sustained demand.

As Alphabet's CFO, Anat Ashkenazi said, the company is investing heavily toward AI compute capacity for Google DeepMind to "meet significant cloud customer demand.”

The backdrop is clearly supportive, but not all companies are positioned the same way.

Amazon’s advantage comes from its business mix. Alongside AWS, it has a large and growing advertising business that generates high-margin cash flow, helping offset the cost of building out cloud infrastructure.

That makes the setup more balanced than a pure infrastructure story, even as the company takes on a much larger investment cycle.

Advertising is becoming a key profit driver

Advertising remains Amazon’s other major source of earnings strength. Advertising revenue rose 23% year over year to $21.3 billion in Q4 2025, extending the company’s momentum in one of its least capital-intensive businesses.

That matters because advertising gives Amazon a second high-margin engine just as AWS becomes far more capital-hungry. Unlike cloud and fulfillment, advertising scales without requiring comparable infrastructure spending, so more of each incremental dollar can flow through to profit.

The business is also no longer a side contributor. Growth across sponsored listings, search monetization, Prime Video inventory, and seller tools has turned advertising into a meaningful offset to the pressure created by heavy AI spending.

CEO Andy Jassy says, “Sponsored products advertising in our store continues to be our largest ads offering, and the combination of trillions of shopping, browsing, and streaming signals with advanced AI and machine learning led us to deliver highly relevant and useful ads for customers.”

A larger advertising business improves the quality of consolidated profit and gives the company more room to fund heavy investment cycles.

What could push Amazon higher

• AWS AI workload growth lifts utilization, supporting faster revenue growth and sustained cloud margin strength
• Advertising keeps compounding across search, Prime Video, and seller tools, improving profit mix
• Custom chips lower the cost of serving AI demand and strengthen cloud economics
• Robotics investment improves fulfillment efficiency and expands retail margins
• Free cash flow stabilization eases concerns about the scale of the buildout and supports valuation

What could pressure the stock

• AI infrastructure spending outpaces monetization, keeping free cash flow compressed
• AWS adds capacity faster than demand absorbs it, hurting utilization and margins
• Rivals capture more enterprise AI workloads, limiting AWS growth
• Advertising growth slows, weakening support from one of Amazon’s highest-margin businesses
• Property and equipment spending keeps rising, reducing financial flexibility
• Large bets in chips, satellites, or robotics take longer than expected to pay off

Key takeaways for Amazon investors

Amazon's AWS business is growing faster again, and advertising is becoming a larger part of the profit mix. Both support a stronger earnings base over time.

At the same time, the company is investing heavily in AI infrastructure, which is weighing on cash flow in the near term.

What matters now is how those two pieces come together.

If Amazon can sustain strong growth while improving returns on that investment, the setup looks solid. If not, investors are likely to stay focused on whether the level of spending is justified.

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