• Morgan Stanley projects AWS growth could accelerate above 20% in 2026, driven by cloud adoption and generative AI workloads.
  • The bank has upgraded its Amazon price target to $300, with a bull case of $350, citing AWS as the primary earnings engine.
  • Capital expenditures are ramping significantly, with approximately $33 billion expected in 2025 to expand cloud infrastructure and meet surging demand.

Morgan Stanley analysts are projecting a significant reacceleration for Amazon Web Services, forecasting that the cloud division’s growth could top 20% in 2026 as new data center capacity finally catches up with pent-up demand. This anticipated surge, driven by the enterprise shift to the cloud and an explosion in generative AI workloads, forms the core of the bank’s bullish stance on Amazon’s stock.

The firm has subsequently upgraded its price target on Amazon by 35% to $300, establishing a new base case. Its more optimistic bull case scenario sees the stock reaching $350, a 60% increase from previous valuations. Analysts pointed to AWS as the linchpin of this valuation, describing it as the company's primary earnings engine through at least 2026. This outlook is further supported by a restored 2026 earnings-per-share estimate of $8, lifted by about 9% due to lower tariff expectations and the accelerating AWS revenue.

After a period where AWS lagged behind rivals like Microsoft Azure in capital investment, spending is now ramping aggressively. The bank expects Amazon to deploy approximately $33 billion in capex in 2025, with continued increases into the following year. This massive investment is aimed squarely at expanding cloud and AI infrastructure to capitalize on what one analyst described as “strong AWS demand and continued efficiency gains across the business.”

Improved global trade relations, particularly a more favorable tariff outlook with China, have also reduced cost pressures, contributing to a stronger overall profit forecast for the parent company. The broader economic environment, including positive advertiser sentiment and robust retail data, is further supporting Amazon’s general business health. When reached for comment on the capex projections and growth forecasts, a representative for Amazon declined to elaborate beyond recent public statements.

While other ventures like Project Kuiper and the AI partnership with Anthropic draw investor interest, Morgan Stanley’s analysis makes clear that AWS remains the uncontested driver of Amazon's valuation for the foreseeable future. The firm considers Amazon "the best internet stock" based on this projected trajectory, though it continues to monitor competitive pressures from other global cloud providers making similar massive investments in AI infrastructure.