Goldman Sachs Maintains Buy Rating on AMZN, Raises Target Price to $325

Overview

This report is Goldman Sachs’ review of Amazon.com Inc.’s Q1’26 results. The report believes AMZN continues to demonstrate leadership across the three major long-term growth themes of e-commerce, AWS cloud computing, and advertising, with Q1 revenue, operating profit, and EPS all exceeding expectations. Near-term market discussion will still focus on the global consumer environment, sustainability of advertising growth, the AI competitive landscape, and capital expenditure pressure. Over the medium to long term, Goldman Sachs believes the company can achieve compound revenue growth and operating margin expansion while continuing to invest in long-term growth projects.

Core views

The core view is that AMZN’s risk-reward remains attractive. On the e-commerce side, it benefits from a more efficient logistics network, faster delivery speed, and lower unit service costs. The advertising business continues to scale in retail media, programmatic advertising, and shifts in media consumption. AWS benefits from enterprise cloud migration, growth in Gen AI workloads, demand for the custom Trainium chip, and backlog conversion. The report therefore raises future operating forecasts and lifts the 12-month target price to $325.

Analysis framework

The report compares actual results with Goldman Sachs forecasts, FactSet consensus expectations, and company guidance, and updates revenue, operating profit, and EPS forecasts for 2026 to 2028. Valuation uses two methods for cross-checking: first, a combined EV/GAAP EBITDA and EV/(FCF-SBC) multiple approach; second, a sum-of-the-parts valuation method, applying different valuation multiples to North America, International, and AWS respectively.

Methodology notes

• Valuation methodsCombined EV/GAAP EBITDA and EV/(FCF-SBC) Valuation

  Based on NTM+1 EBITDA and NTM+4 FCF-SBC, with forward cash flows discounted back to the present.

  Goldman Sachs applies 18.0x EV/GAAP EBITDA to NTM+1 estimates and 50.0x EV/FCF-SBC to NTM+4 estimates, then discounts the latter over 3 years at 12%; the two are equally weighted to derive the valuation reference.

• Valuation methodsSOTP Segment Valuation

  Uses valuation multiples for different business segments that match their growth and profitability characteristics.

  The North America business uses 16.0x EV/GAAP EBIT, the International business uses 1.3x EV/Sales, and the AWS business uses 28.5x EV/GAAP EBIT, all based on NTM+1 estimates.

• factor_analysisGS Factor Profile

  Compares an individual stock with the market and industry peers from the perspectives of growth, financial returns, valuation multiples, and composite factors.

  This framework uses metrics such as forward sales growth, EBITDA growth, EPS growth, ROE, ROCE, CROCI, and valuation multiples to generate percentiles, supporting assessment of a stock’s factor characteristics.

Asset mapping & comparison

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

• AMZN

  Core covered company

  Strengths

  Re-accelerating AWS growth, high-margin expansion in advertising, improved e-commerce fulfillment efficiency, strong Trainium demand, and broad exposure to long-term growth themes.

  Weaknesses

  High capital expenditure pressures free cash flow, while near-term margins are affected by SBC, Leo expansion costs, and transportation costs.

  Comparison

  The report states that AMZN has a relatively attractive risk-reward profile within Goldman Sachs’ coverage and is a leader in long-term themes such as e-commerce, digital advertising, media consumption, subscription aggregation, and cloud computing.

  Risks

  Competition in cloud and e-commerce, expansion of high-margin businesses such as advertising and third-party sellers falling short of expectations, regulatory changes, macro volatility, and declining risk appetite for growth stocks.

• AWS

  Key AMZN business segment

  Strengths

  Revenue grew 28% YoY; backlog and Gen AI workloads increase visibility into future growth, and Trainium demand is strong.

  Weaknesses

  Requires advance build-out of computing and capacity, and elevated capital expenditure may pressure free cash flow in the near term.

  Comparison

  In the segment valuation, AWS uses 28.5x EV/GAAP EBIT, reflecting Goldman Sachs’ high assessment of its long-term structural growth and earnings quality.

  Risks

  AI cloud computing competition, returns on capacity build-out falling short of expectations, and customer demand converting more slowly than expected.

• Advertising Services

  AMZN high-margin growth business

  Strengths

  Q1 grew 24% YoY, benefiting from retail media, programmatic advertising, and shifts in media consumption.

  Weaknesses

  Growth sustainability remains a key area of near-term investor debate.

  Comparison

  The report places advertising alongside AWS and e-commerce as a key source supporting long-term compound growth and margin expansion.

  Risks

  Advertising budget cycles, intensifying competition, and slowing retail media growth.

Key data

• 12-month target price$325Raised from the previous $275, based on the average of two valuation methods and rounded to the nearest $5.
• Current price$263.04Price on the report cover page.
• Implied upside23.6%Based on the report’s target price and current price.
• Q1’26 revenue$181.5bnUp 17% YoY, above the high end of company guidance and market expectations.
• AWS revenue growth+28% YoYRe-accelerated by more than 400 bps from the prior growth rate; the report believes backlog supports 30%+ growth in future quarters.
• Advertising services revenue growth+24% YoYContinues to maintain 20%+ YoY growth.
• Q1’26 GAAP operating margin13.1%The report says this was the highest operating margin in history, above Goldman Sachs and market expectations.
• 2026 revenue forecast$827.60bnRaised from the previous $798.34bn.
• 2026 GAAP EPS forecast$9.02Raised from the previous $7.72; Q1 includes approximately $16.8bn of unrealized investment gains.
• Market capitalization$2.9trDisclosed in the report’s Key Data.

Impact & implications

The report’s investment implications for AMZN are positive: the earnings beat and target price increase reinforce the long-term growth stock thesis, especially the margin expansion driven by AWS, advertising, and e-commerce operating efficiency. However, the report also notes that AI-related capital expenditure, Leo expansion costs, seasonal increases in SBC, and transportation fuel costs may pressure near-term free cash flow and margin performance.

Risks

• E-commerce or cloud business growth could be affected by competitive pressure.
• Expansion of high-margin businesses such as advertising, cloud, third-party sellers, and subscriptions may fall short of expectations.
• Investments in AI, logistics, satellite connectivity, and other long-term projects could weigh on gross margin or operating margin.
• FY26 capital expenditure remains elevated and may pressure free cash flow.
• Seasonal increases in SBC, approximately $1bn of Leo expansion costs, and higher transportation costs from fuel inflation may cause near-term margin volatility.
• Changes in the global regulatory environment may require product or platform adjustments.
• Global macro volatility and shifts in risk appetite for growth stocks may affect valuation.

What to watch

• The pace at which AWS backlog converts into revenue, and whether future quarters can maintain 30%+ YoY growth.
• Demand for Trainium 2, Trainium 3, and Trainium 4, and the contribution of custom chips to the AWS ecosystem and margins.
• Whether advertising services continue to maintain 20%+ YoY growth.
• E-commerce logistics efficiency, Prime same-day delivery, Amazon Now, and the growth sustainability of the fresh and quick commerce business.
• The balance among FY26 capital expenditure, free cash flow, and operating margin.
• Whether Q2’26 revenue, GAAP EBIT, and GAAP EPS can meet the updated Goldman Sachs forecasts.