Wolfe Research believes Amazon.com Inc is positioned for faster cloud growth than the market currently assumes, driven in large part by demand for artificial intelligence computing and an expansion of Amazon Web Services' infrastructure.
In a note outlining its expectations, Wolfe projects AWS revenue will increase at about a 30% annual pace over the next three years - above the roughly 25% growth rate Wall Street is modeling. The brokerage based its outlook on a combination of rising AI computing needs, formal partnerships with large AI developers, and stepped-up data-center capacity.
Wolfe provided a specific revenue example tied to one partner: it estimates AI company Anthropic could produce about $15.2 billion in AWS-related revenue in 2026. That figure encompasses cloud computing consumption, access to Amazon's Trainium chips and revenue-sharing arrangements between the companies.
The analysts also expect contributions associated with OpenAI to grow, though they warned that the financial effects from a recently announced $100 billion contract are unlikely to be meaningful until 2027.
Beyond outcomes driven directly by AI partnerships, Wolfe said AWS should benefit from both added data-center capacity and continued demand for traditional cloud services. The firm forecasts Amazon will add roughly six gigawatts of computing capacity each year in 2026 and 2027, a build-out intended to support new AI workloads as well as core cloud customers.
Such expansion, Wolfe noted, will require substantial capital expenditure. The brokerage estimated Amazon could invest around $1 trillion in capital expenditures between 2024 and 2030, with the majority of that spending attributed to AWS infrastructure and related investment.
Wolfe acknowledged the near-term consequences of that investment program, saying the heavy spending could weigh on free cash flow initially. It expects returns on invested capital to stabilize around 2027 and then begin to improve by 2029 as newly commissioned infrastructure starts generating revenue.
On valuation, Wolfe set a price target of $255 for the stock based on a multiple of about 25 times its 2027 earnings estimate. By comparison, the shares were trading at approximately 21 times those projected 2027 earnings, an implied multiple that the analysts viewed as reasonable given Amazon's combined growth prospects in cloud computing and retail.
Separately, the note referenced additional tools and analyses available to investors, including algorithmic screening and stock idea generation services that evaluate companies across multiple financial metrics. Those services aim to identify risk-reward profiles without reliance on popularity, though the firm's core projection for AWS growth and the related capital plan formed the central thesis of the research note.
Bottom line: Wolfe Research sees AWS growth and the revenue contribution from AI partnerships as underappreciated, but notes the company will require heavy near-term investment that could temper free cash flow before returns on new infrastructure improve later in the decade.