Amazon reported robust results across cloud services, advertising and retail in the fourth quarter, but BMO Capital Markets analyst Brian Pitz warned that the market is treating the company’s large capital expenditure program as a near-term negative rather than a strategic investment with long-term payoff.
In a research note issued on Friday, BMO kept an Outperform rating on Amazon and retained the company as a Top Pick, while increasing its price target to $310 per share. The firm framed the change as part of a view that investors are "misunderstanding CapEx opportunity."
Pitz described the fourth-quarter showing as a "standout quarter," pointing specifically to a 400 basis-point sequential acceleration in AWS growth to +24% - the fastest pace since the third quarter of 2022 and two percentage points above Street expectations, according to the note.
The advertising business also posted solid results, growing 22% year over year on a currency-neutral basis. BMO attributed that expansion in part to new partnerships and integrations, naming Roku and Netflix as recently added partners and citing integrations with Spotify and SiriusXM.
On the infrastructure and hardware side, Pitz highlighted rapid momentum in both AI-related and core non-AI workloads within AWS. He noted that Amazon’s Graviton and Trainium chip lines have surpassed a $10 billion annual revenue run rate and are expanding at triple-digit rates.
Capacity additions were another emphasis in the note. BMO said Amazon "added 1.2GW of capacity in 4Q25" and that the company plans to double capacity again by 2027, representing a fourfold increase in capacity since 2022.
Those expansion plans have coincided with Amazon’s announcement of a planned $200 billion in capital expenditures, a figure that has unsettled some market participants. Pitz argued the market is too focused on the headline spending number and is underappreciating how leaning into AI-related CapEx could support long-term growth for Amazon and peers. BMO said it "applaud[s] AMZN (and peers) for leaning in on AI-related CapEx."
The note combines near-term operational strength in AWS and advertising with a bullish stance on the long-term strategic value of Amazon’s infrastructure and chip investments, underpinning BMO’s maintained Outperform view and higher price target.
Key points
- Amazon’s AWS accelerated to +24% in the quarter, a 400 basis-point sequential improvement noted by BMO.
- Advertising grew 22% year over year excluding currency, helped by partnerships with Roku and Netflix and integrations with Spotify and SiriusXM.
- Amazon’s Graviton and Trainium chip businesses exceed a $10 billion annual revenue run rate and are growing at triple-digit rates; the company added 1.2GW of capacity in 4Q25 and plans to double capacity by 2027, a fourfold increase since 2022.
Risks and uncertainties
- Investor concern over Amazon’s planned $200 billion in CapEx has created near-term negative sentiment toward the stock - a factor that could pressure market perception of the company.
- The market may continue to debate whether large-scale AI-related infrastructure spending will produce commensurate long-term returns, creating uncertainty for equity valuation in the near term.