Amazon is back in Wall Street's good graces. Here's what will determine whether it stays there.

By William Gavin

OpenAI, Anthropic and Meta Platforms are just a few of the companies relying on Amazon for support

Amazon Web Services is expected to account for nearly $37 billion in revenue for Amazon's first quarter of 2026, according to analyst estimates compiled by FactSet.

Amazon.com started to win back Wall Street after showing improvement in its cloud growth three months ago. Now, investors will be looking to see if that momentum has sustained.

Amazon Web Services has become a juggernaut, especially as Amazon (AMZN) has centered its focus - and wallet - on artificial intelligence. The company has forecast some $200 billion in capital expenditures this year, primarily to boost its ability to meet what it sees as significant demand for AI services.

Wall Street sees Amazon's first-quarter revenue coming in at $177 billion, up almost 14% from a year earlier, according to FactSet estimates. Amazon Web Services would account for almost $37 billion in revenue, or about 25% more than it brought home in the March quarter of 2025, according to FactSet. Sales for the AWS division grew 24% year over year in the final quarter of 2025.

Showing that AWS is further accelerating will be "pivotal" in demonstrating whether Amazon can deliver enough growth to justify its spending, RBC Capital Markets analyst Brad Erickson said in a note to clients this week. He rates Amazon at outperform with a $300-per-share price target.

From the archives (Dec. 2019): How Amazon created AWS and changed technology forever

Several analysts have noted that investors want to see if Amazon can maintain AWS operating margin above 30%, while also showing growth. The division's margin grew to 35% in last year's December quarter, AWS's second consecutive period of growth.

"We believe the area of focus among investors remains AWS, which we expect will show a sequential acceleration," Truist's Youssef Squali said in an April 17 note, as the analyst reiterated a buy rating and $285-a-share price target.

In a letter to shareholders this month, Amazon CEO Andy Jassy said that the AI revenue run rate for AWS was over $15 billion in the first quarter of 2026. Jassy also revealed that Amazon's custom-chip business has exceeded a $20 billion annualized run rate.

After ChatGPT maker OpenAI announced new terms in its agreement with Microsoft (MSFT), Jassy cheered the move. On Tuesday, Amazon formally announced that OpenAI's latest models as well as AI agents would be made available through AWS's Bedrock.

"The creative coup to bring OpenAI 'stateful' models onto AWS reduces the Anthropic customer-concentration risk," Bernstein's Mark Shmulik said in a recent note to clients.

See: Oracle, Nvidia and other buzzy tech stocks fall as the 'OpenAI complex' comes under pressure

Amazon has invested in both OpenAI and its rival Anthropic, in turn receiving major commitments from the companies to secure access to Amazon's Trainium chips. Other major companies, including Meta Platforms (META), are also leaning on Amazon's chip business for support.

Amazon's stock is up by more than 12% year to date. That's largely thanks to a 24% increase over the last month driven by Jassy's letter, which helped renew investors' confidence.

Spending is booming. So are concerns.

Not all investors have been sold by the major spending plans proposed by Amazon and its fellow AI hyperscalers.

Combined, Alphabet (GOOGL) (GOOG), Meta and Amazon are expected to spend up to $520 billion in 2026, mostly on AI ventures. Microsoft is expected to book $107 billion in capex in its 2026 fiscal year, which ends in June, according to FactSet. All four companies report earnings on Wednesday.

Although Amazon shares dropped shortly after the company revealed its spending plans, Bernstein's Shmulik said investors have since "made peace" with it. He said in an April 23 note to investors that much of the capex will be monetized in 2027 and 2028, and that the "real debate" is what Amazon plans to do next year.

Semiconductor analysts, he noted, expect Amazon to grow its spending by 50% to 60%, while internet analysts lean closer to 30% growth in 2027. At the high end of those predictions, Amazon's capex could grow to $320 billion in 2027. According to FactSet, Wall Street overall expects capex of just $209 billion.

"If the semis camp is correct, the question isn't whether today's capacity generates returns - it's whether investors can underwrite another (and another?) year (years?) of step-change capex spending with no clear finish line," wrote Shmulik, who rates Amazon at overweight with a $300-per-share price target.

On the other hand, that much spending will make it difficult for rivals to keep up. After all, not many companies can afford to throw that much cash around, which will likely require Amazon to take on additional debt.

Dig deeper: As Amazon raises $15 billion in a bond deal, investors worry about companies taking on too much AI debt

Some of that increased spending could be announced as soon as Wednesday.

Evercore ISI analysts have said they "would not be surprised" if Amazon increases its capex guidance, since agentic AI has proven popular. On Tuesday, Amazon unveiled a handful of new agentic AI products.

-William Gavin

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04-28-26 1508ET