Analysts think Amazon’s sky-high capex is a good thing, even if there’s “shock value” for investors
That said, several analysts also lowered their price targets for Amazon the day after its downbeat earnings report.
Amazon is down 8% today after reporting earnings below expectations, light profit guidance, and an eye-watering $200 billion capital expenditure forecast for this year. But as was the case with Alphabet earlier in the week, analysts seem to think Amazon’s growing spending is a positive.
The question is coming up more and more often as tech giants continue pouring buckets of money into their capex: how should outsiders perceive that spending?
Here are what some of the analysts think, from research notes out today:
JPMorgan’s Doug Anmuth says the $200 billion capex plan has some “shock value to it” but looks more alarming than it really is. While the headline number is larger than Google’s or Meta’s, the firm notes that Amazon’s capex growth is actually smaller — about 30% off the Q4 run rate — and roughly $45 billion is tied to retail.
“Make no mistake, the ~$70B step-up this year is driven largely by AWS and AI, and that’s actually a good thing,” the analyst wrote, adding that Amazon is “willing to take some near-term profit pain to drive significant long-term growth opportunities.”
JPM lowered its price target on the stock to $265 from $305.
Brian Nowak at Morgan Stanley says Amazon is leaning into investment because its core businesses are gaining momentum, with AWS growing faster than expected and retail delivering improving efficiency. While Amazon’s higher-than-expected capex may have rattled investors, the firm says it “should not have been unexpected” this earnings season and argues that “strong AWS growth justifies the spend.”
The bigger investor sticking point, Nowak says, is Amazon’s accelerated multibillion-dollar investment in low-Earth orbit satellites, which lacks clear near-term return metrics. Still, Morgan Stanley remains bullish, calling Amazon the “most under-appreciated GenAI winner” among megacap tech.
Morgan Stanley lowered its target price on the stock to $300 from $315.
Wedbush Securities analyst Dan Ives says Amazon’s results put the company into “prove-it mode” with investors, even as fundamentals remain solid. Amazon’s $200 billion capex plan — about $50 billion higher than expected — will “remain an overhang as investors digest the guide and will likely need to see more tangible returns before regaining comfort.” Ives argues the spending is consistent with Amazon’s long-term strategy, citing accelerating AWS growth, improving retail margins, and strength in advertising as key supports, and says Amazon’s lead in AI is “underappreciated.” Still he lowered his firm’s price target to $300 from $340 to account for near-term profit pressure.
Morningstar analyst Dan Romanoff says Amazon’s fourth-quarter results were solid, but operating income and guidance came in lighter than expected. He points to higher capex plans as a constraint on near-term margin expansion, even as demand — particularly in AWS — remains strong.
“Paired with capital expenditure guidance, these flow through our model, holding valuation steady,” Romanoff wrote, adding that “given the recent selloff, we view shares as attractive.” Morningstar maintained its price target on the stock.
Deutsche Bank analysts wrote that fears of hyperscalers becoming more capital intensive and that investors won’t get a good enough return on that investment “will prove to be unfounded” when it comes to Amazon.
Instead they see the increasing capex as a “pull forward of capital that would have been deployed in the cloud over many years” and have already clocked “very healthy ROIC” for AWS.
“Amazon has spent the better part of the last 20 years watching AWS demand signals and converting that into capacity plans,” they wrote, adding, “There is no company with more data and experience to make this capacity growth decision in 26 and beyond.”
Deutsche, did, however, modestly lower its price target to $290 from $300.
