Why Amazon's stock is a 'must add' ahead of earnings, according to this analyst

By Christine Ji

Amazon could shake off its stock slump as the company heads toward an AWS reacceleration and grows its ad business, a Benchmark analyst says

Shares of Amazon have risen 3% since Friday's close.

Shares of Amazon.com Inc. have been pretty flat in 2025, but Benchmark analyst Daniel Kurnos believes a surge could be right around the corner.

In a note Wednesday, Kurnos called Amazon's stock (AMZN) a "must add," a seemingly unpopular position given that Amazon's stock has been the worst-performing among the "Magnificent Seven" this year. However, Kurnos believes "the tide will turn sooner rather than later," and next week's third-quarter earnings report could be the catalyst needed to turn the stock around. He maintained his buy rating and price target of $260, which is 19% above current levels.

Top of mind for investors going into earnings is Amazon's cloud-services business, which failed to impress last quarter with a 17.5% growth rate. As a result, the company has developed a reputation as an artificial-intelligence laggard. To shake this perception, Amazon Web Services will need to show a reacceleration to 20% growth.

However, AWS remains the largest player in the cloud-infrastructure market. The AWS outage earlier this week didn't have a negative impact on the stock, which has risen 2.7% since Monday.

Amazon has been investing heavily in its data-center buildouts, especially with its AI-computing initiative, Project Rainier, which the company said will begin coming online in the second half of 2025. Investors will be paying attention to next week's earnings call for updates on data-center capacity. Although not expected, the announcement of a major AI contract would drive further upside, according to Kurnos.

Kurnos expressed confidence that AWS will see 20% growth by the end of 2025, while Wall Street projections are forecasting 18.5% growth.

UBS analyst Karl Keirstead wrote in a Wednesday note that he expects 18% to be the "investor growth bogey," or benchmark, for AWS this quarter. However, Keirstead is less optimistic about the near-term acceleration for AWS, anticipating a 17% growth rate for the third quarter. Upside is more likely to come in the fourth quarter or the first half of 2026 as Amazon increases cloud-computing capacity, Keirstead wrote.

Read on: Here's what really matters for Amazon's stock - beyond the AWS outage

There are positive catalysts for the stock beyond AWS growth. A contributor to Amazon stock's rally this week was the company's Tuesday announcement of plans to replace 600,000 workers with robots by 2033, reducing network and fulfillment costs. It's a move that Kurnos said will help improve operating margins in the long term.

But the real upside could lie in Amazon's ad business, which Kurnos said can grow faster than AWS and achieve higher margins.

"We have been one of the earliest and most vocal proponents of the eventual contribution from Amazon's advertising and Prime Video ecosystem, which we continue to note should produce very strong margins at scale," Kurnos wrote.

Amazon's massive retail platform gives its ad business an advantage, especially among the customer base of small-to-medium-sized businesses that sell and advertise on Amazon. Benchmark's checks on Amazon's ad business have yielded positive results.

"We cannot envision a scenario where Amazon is not a winner to some degree," Kurnos wrote.

Read on: Amazon's 'crown jewel' is this business that doesn't get nearly enough attention

-Christine Ji

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10-22-25 1021ET