Amazon stock (AMZN) fell 2% on Friday after the company’s third-quarter results disappointed investors.
However, most analysts remain bullish on the shares, pointing to the longer-term growth potential of Amazon Web Services (AWS) and the company’s expanding artificial intelligence business.
Amazon reported earnings of $1.89 per share, below the $1.96 expected by analysts polled by LSEG. Revenue came in at $201.94 billion, missing the consensus estimate of $202.31 billion.
AWS revenue was approximately $45.98 billion, broadly in line with expectations.
The company also reported a trailing 12-month free cash flow outflow of $42.4 billion, highlighting the capital requirements of its AI infrastructure expansion.
Amazon’s capital expenditure reached $75.9 billion in the third quarter, as it continued investing in data centres and AI-related capacity.
The results triggered a sharp reaction in the stock, with shares falling nearly 7% in premarket trading before opening lower on Friday.
However, analysts generally viewed the sell-off as an opportunity, even as several firms adjusted their price targets.
The stock recovered some of the losses and was trading down 2% at the time of writing.
Analysts see potential despite earnings disappointment
Morgan Stanley analyst Brian Nowak maintained an Overweight rating on Amazon but lowered his price target to $335 from $350.
The revised target still implies approximately 37% upside from Thursday’s closing price.
Nowak said the growth figures were disappointing relative to expectations, but noted that the $3.8 billion quarter-over-quarter increase in AWS revenue was the second-largest in the segment’s history.
He added that the result did not change the cloud business’s long-term opportunity or potential for further acceleration.
Deutsche Bank maintained a Buy rating and a $325 price target.
The bank attributed the negative market reaction largely to AWS growth falling short of higher investor expectations.
However, it highlighted management’s outlook for growth above 40% and said the latest capital expenditure could support a further increase in revenue growth in the coming quarters.
Bernstein also maintained an Outperform rating, with a $320 price target.
The firm acknowledged that advertising growth was weak and AWS did not reach the 40% growth threshold some investors had expected.
However, it noted that cloud growth accelerated and management indicated that growth above 40% was possible through 2028.
Price targets revised as analysts assess AI spending
Several other firms adjusted their valuations following the results, although most retained positive ratings.
Barclays maintained an Overweight rating and a $365 price target.
The bank highlighted Amazon’s capacity expansion and growing backlog, noting that the company was adding more cloud capacity than any other provider.
Bank of America lowered its price target to $317 from $320 while maintaining a Buy rating.
The firm said AWS growth accelerated by two percentage points quarter over quarter to 39%, although investor expectations had reached as high as 42%.
Goldman Sachs also maintained a Buy rating but reduced its target to $370 from $375.
The bank said uncertainty around the long-term economics of AI, including the need for sustained capital expenditure and how companies will finance infrastructure expansion, remained a concern for investors.
Nevertheless, it expects Amazon to deliver revenue growth and operating margin expansion over a multi-year period.
Other firms made more substantial changes.
TD Cowen lowered its target to $340 from $350 but maintained a Buy rating, describing the post-earnings sell-off as overdone.
AWS outlook remains central to bullish forecasts
Analysts continued to identify AWS as a key driver of Amazon’s longer-term investment case.
UBS raised its price target to $352 from $348 and maintained a Buy rating.
The firm highlighted management’s expectation of AWS growth above 40% in both fiscal 2027 and 2028. It also pointed to Amazon’s $578 billion backlog as evidence of demand visibility.
BMO raised its target to $390 from $380, maintaining an Outperform rating.
The firm noted that AWS revenue growth accelerated by 200 basis points from the second quarter, marking six consecutive quarters of improving growth.
It also highlighted triple-digit year-over-year growth in AI revenue, with Amazon Bedrock emerging as an important contributor.
Citi maintained a Buy rating and a $350 target, pointing to the potential for AWS margins to remain in the mid-to-high 30% range.
JPMorgan also retained an Overweight rating and a $365 target, citing management’s confidence in demand as support for its investment plans.
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