By Thomas Richmond

Quick Read

• Amazon (AMZN) reported Q1 revenue of $181.5B (+17%), with AWS accelerating to 28% growth on a $37.6B base and generating $14.2B in operating income, while the custom silicon business exceeded a $20B annual run rate with triple-digit growth.

• Amazon’s massive $200B capex investment for AI infrastructure is beginning to show payoff through accelerating AWS growth and strengthening demand across retail, advertising, and custom chips, though investors remain divided on whether the spending will translate into sufficient revenue gains to justify current valuation.

• The analyst who called NVIDIA in 2010 just named his top 10 stocks and Amazon wasn't one of them. Get them here FREE.

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Amazon (NASDAQ:AMZN | AMZN Price Prediction) currently trades at $263.99, while Wall Street’s average price target sits at $283.79, implying about 7% upside from current levels. Amazon hardly needs an introduction at this point, but as a quick refresher, Amazon operates the largest e-commerce platform in the West, the leading public cloud through AWS, and a fast-growing advertising business that now exceeds $70 billion in TTM revenue. The stock remains a focal point for investors as its capex spree, AWS growth, and profitability all move at once.

The earlier selloff came down to one issue: capex. Management guided roughly $200 billion in 2026 capital expenditures, up from about $132 billion in 2025, with most of the increase tied to AI infrastructure. That level of spending raised concerns about near-term free cash flow.

Those concerns were visible in the numbers. Free cash flow dropped to $1.2 billion over the trailing twelve months, down from $25.9 billion a year ago, driven by a $59.3 billion increase in infrastructure investment.

Q1 Results Show the Payoff Starting

The first quarter began to validate the spending. Revenue grew 17% to $181.5 billion, with AWS accelerating to 28% growth on a $37.6 billion base. Operating income rose to $23.9 billion from $18.4 billion a year ago, while AWS alone generated $14.2 billion in operating income. Net income reached $30.3 billion, though this included a $16.8 billion gain tied to Amazon’s investment in Anthropic.

North America’s operating income increased to $8.3 billion, and International’s improved to $1.4 billion, showing broader profitability gains across the business. The underlying story is clear. Growth is reaccelerating while profitability is improving, even as investment remains elevated.

Why Analysts Stayed Bullish

Analysts have kept their bullish stance because demand continues to strengthen across key segments. AWS is now growing at its fastest rate in over a year, and Amazon’s custom silicon business, including Graviton and Trainium, has surpassed a $20 billion annual run rate with triple-digit growth. Advertising continues to scale, and core retail unit growth reached 15%.

The company is also locking in long-term AI demand. OpenAI has committed to roughly 2GW of Trainium capacity, while Anthropic plans to use up to 5GW. Meta Platforms is deploying tens of millions of Graviton cores for AI workloads. Recently, Truist raised its price target to $285, and Wells Fargo carries a $307 target, while ARK was buying shares into the recovery.

Analysts are decisively bullish with 65 out of 69 sporting a “Buy” rating:

• Strong Buy: 15
• Buy: 50
• Hold: 4
• Sell: 0

My Take: The Easy Money Already Moved

The bull case rests on AWS sustaining high-20% growth through 2026 and the $200 billion capex bill producing a clean step-up in AI-related revenue, in which case targets drift toward the $300 handle that Wells Fargo already prints. The bear case is that the capex line is racing ahead of monetization, in which case another quarter of compressed free cash flow plus another below-consensus operating income guide could easily knock 15% out of the stock again.

Personally, I’d lean more on the cautious side at this level. The ~7% gap to consensus is real, but most of the obvious mispricing was harvested when the stock ripped from $198 to $264. With shares around the 52-week high, the stock might not be notably undervalued today.

Sourced from 24/7 Wallstreet