How Amazon's stock could soar 30% thanks to its cloud business

By Christine Ji

Amazon's stock has trailed most of its Big Tech peers this year, but an increase in cloud capacity could spark a revival

Oppenheimer estimates that every incremental gigawatt of capacity Amazon adds generates roughly $3 billion in revenue.

Amazon.com hasn't received the same level of artificial-intelligence hype as many of its other "Magnificent Seven" tech peers this year, with investors questioning whether its cloud-computing business can gain market share.

But Oppenheimer analyst Jason Helfstein believes Wall Street is overlooking a golden opportunity.

Amazon has already made strides to boost its Amazon Web Services business this year, and AWS is largely seen as the stock's biggest growth driver. The company brought its data-center initiative Project Rainier online last month, and reported a reacceleration in AWS revenue growth to 20% for the third quarter.

As Amazon continues to add new cloud-computing capacity, Helfstein said the stock is poised for a resurgence. In a note published Sunday, he reaffirmed his outperform rating and raised his price target on the stock to $305 from $290.

Shares of Amazon (AMZN) have risen 6.7% in 2025 - making them the second-worst performer in the "Magnificent Seven" group of megacap tech stocks so far this year, just a hair ahead of Tesla shares.

Capacity constraints have been a "material headwind" to AWS reacceleration in past quarters, but Helfstein noted that Amazon is planning to double capacity through 2027 and add at least a gigawatt of capacity in the fourth quarter.

Read: Amazon's 2025 stock gains just got wiped out. Here's how it could make a comeback.

In today's supply-constrained environment, new capacity should be immediately snatched up and translate directly into sales. According to Oppenheimer's calculations, each incremental gigawatt of capacity brings in roughly $3 billion in revenue. In an upside case, Amazon could add 5 gigawatts of capacity per year over the the next two years.

As Amazon brings more capacity online, AWS revenue could grow 36% year-over-year to $175 billion by the end of 2026, Helfstein wrote. That estimate is significantly higher than the FactSet analyst consensus of $154 billion.

Wall Street estimates imply that AWS's revenue per gigawatt will decline and capital expenditures will remain high relative to revenue. However, Helfstein argued that pricing will be more resilient as capacity utilization improves, and Amazon's return on investment for its AI capital expenditures should also improve going forward. AWS capex as a percentage of revenue has increased from 41% in 2024 to an estimated 77% in 2025, but Helfstein expects that to trend toward 56% in 2027, "effectively returning towards historical norms."

Helfstein pointed to AWS's cloud-computing conference, re:Invent, which kicked off on Monday, as a potential near-term driver of the stock.

"Any indication of more capacity/improved chip efficiency could be a catalyst," he wrote.

Read: Amazon and Microsoft's stocks could be in trouble due to AI's destructive economics

-Christine Ji

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12-01-25 1256ET