JPMorgan sees cloud computing entering a renewed growth phase, fueled by heavy infrastructure investment and rapid technological advances, a backdrop that underpins analyst Doug Anmuth’s Overweight rating on Amazon.com Inc. (NASDAQ:AMZN) and his $265 price target—even as the company absorbs near-term pressure from elevated capital spending.
Capex Surge and Strategic Investments
This year, Seattle-based Amazon plans to ramp up its capex to a staggering $200 billion. That’s a $70 billion increase year-over-year.
This move is largely attributed to the enhancement of its AWS infrastructure and AI capabilities, Anmuth noted.
Such significant investments are expected to temporarily reduce free cash flow (FCF), with projections indicating a potential FCF burn of $36 billion, according to the analyst.
However, these investments are seen as necessary to bolster long-term growth, particularly in cloud services where demand continues to surge, he noted.
Anmuth projected total capex of $198 billion in 2026 (+54% Y/Y) and $240 billion in 2026 (+21% Y/Y).
Accelerating AWS Growth Amid Rising Demand
AWS is experiencing rapid growth, with backlogs reaching $244 billion in the fourth quarter, up 38% year over year.
This growth is fueled by increasing demand across both core and AI-enhanced workloads. Notably, AWS’s deal with OpenAI, valued at $38 billion over seven years, underscores the substantial commitments and the expected continuation of this growth trajectory, Anmuth told.
The analyst forecasts AWS growth to potentially reach 27% in 2026, reflecting both the sector’s expansion and Amazon’s effective scaling strategies.
Geographical Expansion and Revenue Streams
Amazon’s revenue growth isn’t just confined to its cloud segment, Anmuth noted.
Geographically, the company is making strides in international markets such as Germany, the U.K., and Japan, the analyst explained.
These regions are reporting accelerated revenue growth, contributing significantly to Amazon’s global sales figures.
Additionally, the company is generating revenue from video and music streaming services, he added.
Anmuth expects Amazon to continue its aggressive investment strategy and focus on technological advancements as well as infrastructure expansion.
While this approach may weigh on short-term financials, Amazon will enjoy significant market-share gains in the coming years, according to the analyst.
Anmuth projected first-quarter 2026 revenue of $178.30 billion and adjusted EPS of $3.21.
Price Action: AMZN stock was up 0.80% at $210.42 at last check on Tuesday.
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