Amazon's stock jumped 15.32% after second-quarter 2026 results beat estimates, powered by accelerating AWS cloud growth. Morgan Stanley raised its price target to $335, even as heavy AI capital spending and Amazon's growing exposure to unprofitable AI labs OpenAI and Anthropic complicate the bullish case.
Amazon stock closed the July 31 trading session up 15.32% at $271.58, soaring after the company released its second-quarter 2026 earnings on July 30. The shares are now up 17.66% year to date, well ahead of the S&P 500's about 9.55% gain over the same span.
AWS carries the earnings beat
AWS sales grew 37% in the quarter, well past Wall Street's forecast of 31% growth. The cloud unit generated $16.6 billion in operating income — about 60% of Amazon's total profit despite holding just a 21% revenue share. Companywide, revenue reached $200.6 billion, up 20% year over year.
Wall Street lifts its targets
Morgan Stanley analyst Brian Nowak raised his price target to $335 from $330, reiterating an overweight rating based on a 25x multiple. His team cited AWS's roughly 840 basis-point acceleration to 36.8% year-over-year growth as evidence of strong returns on its AI investment. Analysts also raised their 2027 and 2028 capital-spending estimates to $325 billion and $350 billion, respectively. They also pointed to an AWS backlog of $496 billion, about $20 billion above expectations. Separately, according to MarketBeat, 56 of the 59 analysts covering Amazon rate it a buy, with an average price target of $322.12.
AI spending complicates the picture
CEO Andy Jassy said Amazon now expects to spend about $220 billion in cash capital expenditures in 2026, up from a prior estimate of about $200 billion because of higher memory costs. He added that Amazon "will still not have enough capacity to meet all the demand" in 2026. That buildout is already pressuring cash flow: free cash flow turned negative $7.6 billion in the quarter, reversing from positive $1.2 billion in Q1 2026 and $18.2 billion in Q2 2025.
Much of the growth story also rests on Amazon's stakes in OpenAI and Anthropic, both still unprofitable. Non-operating gains of $53.4 billion on Amazon's Anthropic investment accounted for much of the reported net income increase, which is not yet tested by a public market. Credit markets are also wary of the wider AI buildout: SoftBank's attempt to secure a loan against its OpenAI shares stalled even after reducing the request from $10 billion to $6 billion. Morgan Stanley's own bear-case scenario puts Amazon's price target at $215, well below the stock's current level.
Sources: TheStreet, Motley Fool
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