AMZN: Accelerating Cloud Demand and Mega AI Deal Will Drive Further Gains

Amazon.com’s analyst price target has shifted higher, rising from approximately $288 to $293 per share. Analysts cite accelerating AWS revenue growth and improved profit margins, fueled by major new cloud deals and robust financial results.

Analyst Commentary

Recent Street research on Amazon.com highlights a range of perspectives regarding the company's growth prospects, valuation, and strategic positioning, especially in light of major cloud and retail developments.

Bullish Takeaways

Bullish analysts continue to raise price targets for Amazon, citing accelerating AWS revenue growth and notable wins, including a substantial multi-year partnership with OpenAI. This $38 billion commitment underscores AWS’s ability to secure and scale high-value cloud deals.
The successful execution of AWS’s dual AI chip strategy supports diverse client demand and has drawn major artificial intelligence leaders as customers. This demonstrates Amazon's flexibility and infrastructure strength.
Retail fundamentals also appear strong, with better-than-expected quarterly results, robust order frequency, and advertising growth fueling margin expansion across business lines.
The ongoing expansion into the grocery sector, both via first-party and third-party partnerships, is viewed as a driver of durable growth and a potential source of incremental profitability and share gains.

Bearish Takeaways

Bearish analysts point to Amazon's valuation, noting that significant upside from major opportunities, such as cloud and grocery, may already be reflected in the stock price. This may leave less room for further near-term appreciation.
There are ongoing concerns about aggressive revenue expectations for some Amazon partners and potential operational complexity in newer ventures, such as grocery and automotive, which tempers profitability outlooks.
The competitive environment in both cloud and retail segments is intensifying, with rivals pursuing similar growth strategies that could potentially limit Amazon’s market share expansion.
In certain ancillary areas, like automotive and data center partnerships, some analysts see execution risks and a lack of immediate revenue contributions. This supports a more cautious stance on long-term results.

What's in the News

Amazon and Microsoft are supporting the Gain AI Act, which aims to prioritize U.S. access to advanced AI chips amid concerns over exports to China. This legislation could give Amazon and Microsoft an advantage, while Nvidia opposes the act, calling it unnecessary intervention. (The Wall Street Journal)
Amazon is cracking down on illegal sports streaming by blocking apps that provide pirated content on its Fire TV stick devices. This effort is designed to protect creators and customers from malware and fraud. (The New York Times, The Athletic)
Amazon's Prime Video advertising has reached 315 million monthly active ad-supported users worldwide, demonstrating the platform's broad reach for advertisers. (Deadline)
The European Commission is pausing parts of its AI laws amid industry pressure, including from Amazon, as the EU seeks to balance tech regulation with competitiveness. (The Financial Times)
Amazon has demanded that Perplexity AI stop its AI agent, Comet, from making purchases on the platform for users without disclosure. The company cites violations of terms and privacy concerns. (Bloomberg)

Valuation Changes

Fair Value has risen slightly from $287.57 to $293.03 per share, reflecting improved financial outlooks.
Discount Rate has increased modestly from 8.33% to 8.61%, indicating higher perceived risk or cost of capital.
Revenue Growth expectations have edged up from 11.27% to 11.46% annually, which suggests more optimism about top-line expansion.
Net Profit Margin has improved marginally from 12.78% to 12.87%, signaling greater anticipated profitability.
Future P/E Ratio has moved up slightly from 33.71x to 34.24x, which implies a higher expected valuation relative to future earnings.

AWS's leadership in cloud and AI, along with deep integration and enterprise relationships, positions Amazon for strong high-margin growth as digital adoption accelerates.
Enhanced logistics automation, international expansion, and a growing Prime ecosystem drive structural cost efficiency, improved margins, and sustained revenue growth.
Competitive, regulatory, and cost pressures across AWS and core retail risk squeezing margins and hindering Amazon's ability to sustain profitable, consistent long-term growth.

Catalysts

About Amazon.com

Engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally.What are the underlying business or industry changes driving this perspective?

Massive and still early-stage shift of global IT spend from on-premises to cloud, with management noting that 85–90% of worldwide IT expenditure remains outside the cloud and that this dynamic is poised to reverse over the next 10–15 years; AWS's broad functionality, leading security, and existing enterprise relationships position it to capture significant high-margin revenue growth as cloud and AI adoption accelerate.
Rapid advances and adoption of generative AI, coupled with Amazon's deep vertical integration (custom silicon, proprietary models, tools for agent building/deployment), are fueling both incremental demand for AWS infrastructure and the rollout of new AI-powered features across retail and devices, creating operating leverage and supporting potential future margin expansion in high-growth segments.
Ongoing optimization of Amazon's logistics and fulfillment operations-including further automation, robotics, and inventory placement enhancements-is driving structural cost reduction, faster delivery speeds, and improved customer experience, contributing directly to higher net margins and improved operating income in both North America and international markets.
Continued international expansion, especially in emerging markets, with both improving operational efficiency and growing Prime member base, is driving scalable revenue growth and contributing to margin uplift as these regions reach profitability, supporting long-term consolidated margin and EPS growth.
Strengthening Prime ecosystem and marketplace flywheel (content, exclusive live sports, product selection, increasing Prime sign-ups, and new verticals like healthcare and Project Kuiper) are increasing recurring revenues, share of wallet, and customer retention, supporting durable top-line and premium margin growth over the long term.

Amazon.com Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Amazon.com's revenue will grow by 10.6% annually over the next 3 years.
Analysts assume that profit margins will increase from 10.5% today to 12.3% in 3 years time.
Analysts expect earnings to reach $111.9 billion (and earnings per share of $10.14) by about September 2028, up from $70.6 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $70.7 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 33.4x on those 2028 earnings, down from 36.0x today. This future PE is greater than the current PE for the US Multiline Retail industry at 21.6x.
Analysts expect the number of shares outstanding to grow by 1.43% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.45%, as per the Simply Wall St company report.

Amazon.com Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent supply chain risks and uncertainty surrounding tariffs-especially those tied to China-could lead to higher costs for Amazon and its third-party sellers in the medium to long term; if these costs are absorbed or cannot be passed onto customers, this would pressure operating margins and possibly constrain revenue growth.
AWS, Amazon's main earnings driver, is experiencing both increased capital intensity (notably in custom chips and data centers) and growing competition, with challenges around supply constraints (e.g., power and semiconductors), and the need for massive ongoing investment-these factors risk compressing AWS's segment margins and limiting overall earnings growth if AWS fails to keep pace with rivals technologically or commercially.
Intensifying regulatory scrutiny (implied through references to legal risks, compliance, and SEC filings) and potential changes in global trade, data protection, and technology policy could raise compliance costs, limit Amazon's ability to scale certain businesses, and negatively affect profitability and revenue consistency.
Saturation and slower e-commerce growth in Amazon's core markets, particularly in mature geographies (e.g., U.S., U.K., Germany, Japan), could constrain long-term topline retail revenue growth and create greater dependence on more volatile or lower-margin international and emerging segment expansion.
Cost escalation risks from higher labor costs, logistics infrastructure investment, and the arms race in automation and AI (robotics, next-generation Alexa, Project Kuiper, etc.)-if not met with proportional efficiency gains or profitable monetization-could result in net margin compression and weaker earnings leverage over the long run.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $263.18 for Amazon.com based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $306.0, and the most bearish reporting a price target of just $225.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $905.9 billion, earnings will come to $111.9 billion, and it would be trading on a PE ratio of 33.4x, assuming you use a discount rate of 8.4%.
Given the current share price of $238.24, the analyst price target of $263.18 is 9.5% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.