Amazon (AMZN.US) stock price plummeted after the results, Wall Street is busy singing a lot: the AWS growth logic has not changed

The Zhitong Finance App learned that Amazon (AMZN.US) stock prices plummeted after announcing its third-quarter earnings report, but many Wall Street institutions are still optimistic. Amazon's financial report itself is not weak: revenue increased 12% year over year to US$2019 billion, operating profit jumped 61% to US$28.1 billion, and operating profit margin reached a record high. The focus of the market sell-off is not on current performance, and AI investment returns and free cash flow are under pressure.

Management said that moving to the second quarter of Prime Day dragged down the reported growth rate. If this effect were excluded, the growth rate should have been “about 400 basis points higher.” AWS was the protagonist of the conference call. Its revenue reached 46 billion US dollars, and the growth rate is accelerating. Amazon maintains a capital expenditure plan of approximately $220 billion in 2026 (mainly for AWS) and expects a “significant increase” in spending in 2027.

J.P. Morgan Chase: Maintains “Overweight” rating, targets $365

Analyst Doug Anmuth pointed out that AWS grew 39% year on year in the third quarter, slightly lower than the bank's 41% forecast, but it was still the fastest growth rate in five years, and production capacity was limited; the AWS backlog of orders reached 578 billion US dollars, up 189% year on year, up 17% month on month, and sold out a significant portion of production capacity until 2028. He believes that management's strong visibility into demand makes them confident to promise more than 40% growth over the next two years and invest more actively in AI computing power infrastructure.

“We are aware that increased investment and greater free cash flow consumption in the short term may raise some questions, but Amazon is showing returns and laying the foundation for a much larger business in the medium to long term,” he wrote.

In terms of capital expenditure, Amazon maintained its 2026 US dollar plan of about 220 billion US dollars, but the third quarter expenditure reached 77 billion US dollars; the bank expects capital expenditure to rise to 395 billion US dollars in 2027 (77% year-on-year increase), further increase to 476 billion US dollars in 2028, and free cash flow of about -128 billion US dollars in 2027. The bank believes that servers and network equipment have a payback of less than three years, a service life of five to six years, and a 30-year service life of the data center, providing return support for high-intensity investment.

Bank of America: Maintaining a “buy” rating, target price of $317

Analyst Justin Post said that under the impetus of new corporate contracts, backlog orders grew strongly month-on-month and year-over-year, custom chip usage was rising steadily, chip export sales were imminent, and Alexa shopping usage continued to grow. These factors convinced the bank that Amazon has a strong AI position and is one of the preferred stocks in the technology sector. Post pointed out that Amazon's next catalyst is the Re:Invent conference, which may showcase new Trainium chips, AI applications, and even cutting-edge model advances.

Susquehanna: Maintaining a “positive” rating with a target price of $325

Analyst Shyam Patil believes that despite some short-term noise, the bank still sees Amazon as a long-term continuous growth company, supported by strong e-commerce, cloud and AI, and advertising businesses.

Morgan Stanley: Maintaining an “Overweight” rating and being listed as a preferred stock, the target price was lowered from $350 to $335

Analyst Brian Nowak believes that the 39% year-on-year growth rate of AWS in the third quarter was lower than the 42% forecast by the bank's model, but it was more of a failure at the expected level — the third-quarter revenue increase of $3.8 billion month-on-month was the second-highest single-quarter increase in AWS history, without changing its potential for further acceleration.

The bank listed six factors supporting the subsequent growth of AWS: the company's revenue guide for the fourth quarter implied a low to mid-range growth in the 40% range of AWS; $77 billion in capital expenditure in the third quarter, which predicted chip and rack delivery and new data center adoption; management guidance grew by more than 40% from 2027 to 2028; AWS's path to trillion-dollar revenue was not fully priced; $578 billion in backlog orders; and Trainium export sales. The bank cut AWS revenue growth in 2027 and 2028 from 47% and 42% respectively to 44% and 42%.

On the retail side, the bank also gave positive reviews. Amazon's “agency shopping” position is stable: over 400 million customers used Alexa to shop in the past year, up 60% year over year, user interaction increased 570%, and the average spending of US customers using the feature was 50% higher than that of non-users. In addition, unit fulfillment costs and unit transportation costs decreased by 3% and 2%, respectively, despite facing headwinds of about US$880 million in fuel and mainline transportation costs; although the delay of Project Leo capitalization to the first quarter of 2027 brought headwinds of about $1 billion (compared to the bank's previous forecast), retail EBIT profit margin in North America is still expected to reach about 10%.

Seeking Alpha analyst Daniel Jones believes that the sharp drop in stock prices was just the time to buy more; another analyst, Bohdan Kucheriavyi, was more cautious, citing concerns about free cash flow and long-term debt.

As of press release, Amazon was down 6.85% in the premarket to $227.10.