J.P. Morgan reiterates Amazon.com Overweight and raises price target to $365

Overview

This is J.P. Morgan's review of Amazon.com's 2Q26 results. The report's central conclusion is that Amazon saw accelerating growth in both AWS and Stores, with AI-related demand and core cloud migration jointly driving improvements in AWS backlog, revenue, and margins, while operating profit significantly exceeded expectations. The analysts therefore raised their 2026/2027 revenue, operating profit, and EPS forecasts and reiterated Amazon as a Best Idea.

Core views

The report identifies three major investment theses for Amazon: first, AWS is benefiting from AI adoption, enterprise cloud migration, and demand for proprietary chips, with growth entering a reacceleration phase; second, the return path for AI investment is relatively clear, with payback periods for servers and networking equipment of less than three years, while data centers have useful lives of more than 30 years and can support multiple generations of server upgrades; third, the Stores business continues to deliver strong unit growth driven by Prime, delivery speed, and grocery and daily-needs categories, while high-margin businesses such as advertising and AWS continue to support group margin expansion.

Analysis framework

The report primarily bases its analysis on post-earnings management communications, actual 2Q26 results, 3Q guidance, AWS backlog, AI business ARR, capital expenditure plans, margin changes, and valuation multiples, while updating its 2026-2028 forecasts for revenue, operating profit, EPS, and capex.

Methodology notes

• Valuation MethodPrice-to-Earnings Valuation

  Dec-2027 price target based on 2028E GAAP EPS and target P/E multiple

  J.P. Morgan bases its $365 price target on 2028E GAAP EPS of $13.0 and an approximately 28x P/E multiple, believing Amazon's faster profit growth can support a valuation premium relative to GOOGL and META.

• Capital Return AnalysisROIC Framework

  AI capital expenditure payback period

  Management emphasized that the ROIC of AI investment is attractive, with payback periods for servers and networking equipment of less than three years, while the related assets have longer useful lives; data centers have useful lives of more than 30 years and can accommodate five to six generations of servers.

• Earnings RevisionEarnings Forecast Adjustment

  Raising 2026/2027 revenue, operating profit, and EPS forecasts

  Following the results, the report raised its 2026/2027 sales forecasts by approximately 1-2%, operating profit forecasts by approximately 5-7%, and its 2027 GAAP EPS forecast by approximately 4%.

Asset mapping & comparison

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

• AMZN.US

  Core covered security

  Strengths

  Accelerating AWS growth, AI and chip business ARR above $25B, strong Stores unit growth, high margins in advertising and AWS, and competitive advantages from Prime and delivery speed.

  Weaknesses

  Significantly higher capital expenditures, near-term pressure on free cash flow, and a margin expansion path that may be affected by the pace of reinvestment.

  Comparison

  The report notes that the $365 price target represents approximately 28x 2028E GAAP EPS, above approximately 18.5x for GOOGL and 13.5x for META, because AMZN's profit growth is faster.

  Risks

  AWS reacceleration falling short of expectations, pressure on US consumption, GenAI monetization remaining at an early stage, intense competition in cloud and retail, regulatory scrutiny, and weaker relative valuation support compared with peers.

Key data

• Current Share Price$235.50As of July 30, 2026.
• Price Target$365.00Dec-2027 price target; the previous Dec-2026 price target was $330.
• 2Q Amazon FXN Revenue Growth+20%The fastest growth rate in 20 quarters, with both AWS and Stores accelerating.
• 2Q AWS Revenue Growth+37%The fastest growth rate in 18 quarters, exceeding the buy-side expectation of approximately 35-36%.
• AWS Backlog$496BNearly 2.5x year over year and up 36% sequentially.
• AWS AI Business ARRAbove $25BUp from above $15B ARR in 1Q and achieving triple-digit growth.
• AWS Margin39.4%Strong year-over-year and sequential performance; approximately 37.9% excluding one-time gains.
• 2Q Operating Profit$27.5BUp 43% year over year and 15% above J.P. Morgan's $23.9B forecast, including approximately $1.2B in one-time gains.
• 2026 Capex OutlookApproximately $220BThe company raised its 2026 capex outlook by 10% and expects to maintain heavy investment in the coming years.
• 2027 Capex Forecast$365BJ.P. Morgan's model forecasts 65% year-over-year capex growth in 2027.

Impact & implications

The report's investment implications for AMZN are positive: AWS reacceleration and improved visibility into AI returns should help alleviate market concerns about high capital expenditures diluting free cash flow; meanwhile, Stores unit growth, delivery efficiency, and resilient advertising revenue support group margins. The higher price target indicates that the analysts are willing to assign Amazon a higher valuation premium.

Risks

• The pace of AWS reacceleration and its normalized growth trajectory remain uncertain.
• The condition of US consumers and macroeconomic pressure may affect consumer spending.
• Amazon has historically continued to invest in growth, and the path to margin improvement may not be linear.
• GenAI commercialization remains at an early stage, with limited revenue visibility.
• Competition is intense in the Stores and Cloud businesses.
• Regulatory scrutiny could create pressure over multiple years.
• Traditional valuation support is weaker than that of some large-cap technology peers.

What to watch

• The pace at which AWS backlog converts into revenue.
• The sustainability of ARR growth in AI- and Trainium/Graviton-related businesses.
• The scale of capex investment in 2027-2028 and its impact on free cash flow.
• AWS margin stability during the heavy-investment cycle.
• 3Q revenue growth and operating profit performance following the change in Prime Day timing.
• Stores unit growth, the proportion of same-day/overnight deliveries, and penetration of grocery and daily-needs categories.
• The launch of Amazon Leo satellite internet services and the realization of revenue commitments from enterprise and government customers.