UBS maintains Buy on Amazon.com and raises the target price to US$318, with AWS acceleration as the key focus

Overview

This is a UBS company earnings review report on Amazon.com. The report focuses on 2Q26 results, AWS growth momentum, capital expenditure adjustments, 3Q26 guidance, and valuation updates. UBS maintains its Buy rating and raises the target price from US$305 to US$318, believing AWS growth can accelerate further, driven by enterprise AI demand, Bedrock, core cloud services, and expected Trainium chip adoption.

Core views

UBS's core view is that AWS has entered a stronger acceleration phase after 37% YoY growth in 2Q26. Combined with AI ARR increasing from US$10B to US$25B, a US$496B backlog, and OpenAI's expected use of Trainium chips in early 2027, AWS growth could approach 39% in the second half of 2026 and exceed 40% in 2027. The report also believes that although 2026 CapEx guidance was raised from US$200B to US$220B, investors may be willing to accept the incremental investment because AWS growth is sufficiently strong. UBS expects market expectations for Amazon's revenue and operating profit to continue converging toward its higher forecasts, thereby driving a valuation re-rating for AMZN.

Analysis framework

The report uses earnings comparisons, segment growth analysis, backlog and AI ARR tracking, CapEx and free-cash-flow estimates, and scenario-based valuation analysis. UBS compares Amazon's 2Q26 revenue and operating profit with company guidance, its own forecasts, and market consensus estimates, while adjusting 2026-2028 forecasts for key segments including AWS, North America retail, international business, advertising revenue, and e-commerce fulfillment costs.

Methodology notes

• Valuation MethodP/FCF

  Price-to-free-cash-flow valuation

  UBS values the company using the Price to Free Cash Flow method, believing Amazon is assessed and communicated to investors primarily around cash-flow generation. It estimates 3Q27-2Q28 free cash flow at US$116.3B and applies a 30x multiple to derive a US$318 target price.

• Scenario AnalysisUpside/Base/Downside Case

  Upside, base, and downside scenarios

  The upside case has a US$509 target price, assuming two-year revenue growth of 20%, a free-cash-flow margin of 14.5%, and a 35x multiple; the base case is US$318, assuming two-year revenue growth of 16.9%, a free-cash-flow margin of 11.0%, and a 30x multiple; the downside case is US$153, assuming two-year revenue growth of 13.0%, a free-cash-flow margin of 8.5%, and a 20x multiple.

• Performance ValidationResults vs Estimates

  Actual results versus expectations

  The report compares 2Q26 net sales, operating profit, AWS growth, North America retail, CapEx, and other metrics with UBS forecasts, market consensus estimates, and company guidance to assess the sources of the earnings beat and the direction of subsequent forecast revisions.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• AMZN.O / AMZN US

  The report's covered security; UBS maintains a Buy rating and raises the target price.

  Strengths

  AWS growth is accelerating significantly, with higher AI ARR and backlog; 2Q26 revenue and operating profit exceeded expectations; e-commerce demand remains resilient; free-cash-flow valuation still supports upside.

  Weaknesses

  2026 CapEx guidance was raised to US$220B; 3Q26 revenue guidance is below market expectations; transportation costs grew 19%, above 17% unit-volume growth; advertising-revenue forecasts were lowered after a slight quarterly miss.

  Comparison

  UBS notes that the target price implies approximately 19x 2027E GAAP EPS, below the approximately 20x-25x range for large-cap technology peers such as GOOGL and META, and believes AMZN should not trade below market multiples.

  Risks

  Intensifying competition, deteriorating consumer sentiment, greater-than-expected capital intensity, and lower-than-expected returns on AWS or e-commerce investment.

• AWS

  Amazon's core growth driver and the report's most important positive variable.

  Strengths

  37% YoY growth in 2Q26; AI ARR reached US$25B; backlog reached US$496B; Bedrock, core cloud services, and Trainium-related demand provide growth visibility.

  Weaknesses

  Higher AI-compute workloads may raise investor concerns about margin stability; changes in energy costs and capital expenditures could affect earnings quality.

  Comparison

  AWS growth was significantly above the market's 31% estimate and UBS's 32% estimate; UBS expects growth could exceed 40% in 2027.

  Risks

  Excessive capital intensity, rising AI-compute costs, intensifying cloud-computing competition, and weaker-than-expected margin expansion.

• Amazon E-commerce and Retail Business

  One of the core businesses supporting Amazon's overall revenue scale and profit improvement.

  Strengths

  North America retail revenue was US$116.2B in 2Q26, above UBS's US$111.9B estimate and the market's US$113.8B estimate; unit-volume growth indicates resilient demand.

  Weaknesses

  Transportation-cost growth of 19% exceeded unit-volume growth of 17%, reflecting cost pressure from faster delivery, Amazon Now expansion, fuel prices, and changes in category mix.

  Comparison

  The report uses unit growth and transportation-cost growth as proxy indicators for monitoring e-commerce profit improvement.

  Risks

  Deteriorating consumer sentiment, intensifying offline and online retail competition, and persistently high fulfillment and delivery costs.

Key data

• 2Q26 RevenueUS$200.6BAbove UBS's US$196.2B estimate and the market's US$196.8B estimate, as well as the company's US$194B-US$199B guidance range.
• 2Q26 Operating ProfitUS$27.5BAbove UBS's US$24.2B estimate and the market's US$23.8B estimate, including approximately US$1.2B of one-time gains.
• AWS 2Q26 Growth37% YoYAbove UBS's 32% estimate and the market's 31% estimate, and also above 17% in 2Q25.
• AWS AI ARRUS$25BSignificantly higher than the US$10B disclosed in 1Q26; the report believes enterprise demand for Bedrock and core cloud services is accelerating.
• BacklogUS$496BCompared with UBS's prior forecast of US$478B; the report believes this includes approximately US$100B related to the Anthropic transaction.
• 2026 CapEx GuidanceUS$220BRaised from US$200B, primarily due to higher memory and supply-chain costs.
• 3Q26 Revenue GuidanceUS$197B-US$202BBelow the market's US$203.9B estimate and UBS's US$207.0B estimate, partly due to Prime Day moving forward from July to June.
• Target PriceUS$318Raised from US$305, based on US$116.3B of 3Q27-2Q28 free cash flow and a 30x P/FCF multiple.
• Current PriceUS$258.12Price date: July 30, 2026.
• Forecast Share-Price Return23.2%Forecast share-price upside of 23.2%, forecast dividend yield of 0.0%, and forecast excess return of 13.9%.

Impact & implications

The report's investment implication for AMZN is positive: accelerating AWS growth and improving visibility into AI-related revenue are the primary drivers supporting the target-price increase and valuation re-rating. Although capital spending continues to rise, 3Q26 revenue guidance is below expectations, and transportation-cost growth exceeds unit-volume growth, UBS believes these factors do not change the medium-term investment thesis. If AWS revenue growth and margins continue to outperform market expectations, consensus forecasts may be revised upward further, and AMZN's valuation discount relative to large-cap technology peers may narrow.

Risks

• Increasing competition in online e-commerce and offline retail.
• Deteriorating consumer sentiment could affect transaction volume and consumption frequency.
• Higher-than-expected capital intensity in the e-commerce platform or AWS could depress free-cash-flow forecasts.
• Rising AI-compute, memory, and supply-chain costs could weaken AWS margins.
• 3Q26 revenue guidance is below market expectations, and the change in Prime Day timing could disrupt quarterly growth patterns.
• Transportation-cost growth exceeding unit-volume growth could affect the path of e-commerce margin improvement.

What to watch

• Whether AWS YoY growth in future quarters approaches or exceeds UBS's expectations of 38.9% in 3Q26 and above 40% in 2027.
• AWS AI ARR, Bedrock adoption, Trainium chip usage, and the pace of demand realization related to OpenAI.
• The pace at which the US$496B backlog converts into revenue and the quality of gross margins.
• Whether 2026 CapEx guidance of US$220B is revised upward again and its impact on free cash flow.
• Whether 3Q26 revenue and operating profit are pressured by Prime Day timing, an approximately 80-basis-point adverse foreign-exchange impact, and transportation costs.
• Whether market consensus estimates continue converging toward UBS's higher forecasts for revenue and operating profit.