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

Overview

Goldman Sachs maintained its Buy rating after Amazon's Q1'26 results and raised its 12-month price target from $275 to $325. The report's core view is that Amazon's revenue momentum remains strong across three long-term growth pillars: e-commerce, advertising, and AWS, while improved operating efficiency is driving margin expansion. Near-term debates mainly focus on the global consumer environment, whether advertising services growth can continue, the AI competitive landscape, and pressure on free cash flow from high capital expenditure.

Core views

The report believes Amazon can achieve compound revenue growth and operating margin expansion over a multi-year horizon. The e-commerce business benefits from higher volume, a more efficient logistics network, and lower unit service costs; the advertising business continues to expand at high margins amid retail media, programmatic advertising, and shifts in media consumption; AWS is driven by enterprise cloud migration and growth in generative AI workloads, supported by revenue backlog, Trainium demand, and its in-house chip ecosystem.

Analysis framework

Goldman Sachs updated its investment view by combining Q1'26 actual results, management's outlook for Q2 and the full year, segment revenue and profit forecasts, valuation multiples, and sum-of-the-parts valuation. The price target is supported by two types of methods: a standard multiple approach blending EV/GAAP EBITDA and EV/(FCF-SBC), and an SOTP valuation that breaks out North America, International, and AWS.

Methodology notes

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

  Standard Multiple Valuation

  Part of the price target is based on an 18.0x multiple of NTM+1 GAAP EBITDA and a 50.0x multiple of NTM+4 FCF-SBC discounted back three years at a 12% discount rate, with the two methods equally weighted.

• Valuation methodsSOTP

  Sum-of-the-Parts Valuation

  The report applies EV/GAAP EBIT to North America and AWS, EV/Sales to International, and estimates segment enterprise value based on NTM+1 forecasts.

• factor_profileGS Factor Profile

  Goldman Sachs Factor Profile

  This framework compares a stock's position relative to the market and industry peers across four dimensions: Growth, Financial Returns, Multiple, and Integrated, as background context for the investment view.

• corporate_actionM&A Rank

  M&A Probability Score

  Amazon's M&A Rank is 3, representing a relatively low probability of being acquired; the report notes that this rank is usually not incorporated into the price target.

Asset mapping & comparison

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

• AMZN.US

  subject_company

  Strengths

  AWS growth has reaccelerated, the advertising business is maintaining growth above 20%, e-commerce logistics efficiency is improving, and Q1 revenue and operating profit both exceeded expectations.

  Weaknesses

  FY26 capital expenditure is high, SBC, Leo expansion costs, and fuel transportation costs may cause margin volatility, and free cash flow is under pressure.

  Comparison

  The report says AMZN offers an attractive risk-reward profile within Goldman Sachs' coverage and is a leading company across long-term themes including e-commerce, digital advertising, media consumption, subscription aggregation, and cloud computing.

  Risks

  The e-commerce or cloud business could be affected by competition, high-margin business expansion may fall short of expectations, regulatory changes, macro volatility, and lower risk appetite for growth stocks.

• AWS

  core_business_segment

  Strengths

  Q1 revenue grew 28% year over year, supported by enterprise cloud migration, generative AI workloads, revenue backlog, and Trainium demand.

  Weaknesses

  It needs continued build-out of computing power and capacity, capital expenditure is high, and the AI competitive landscape remains a key investor debate.

  Comparison

  The report views AWS as an important source of Amazon's long-term structural growth and valuation, using a 28.5x EV/GAAP EBIT multiple in the SOTP.

  Risks

  Cloud competition, changes in AI customer choices, the pace of computing capacity build-out, and uncertainty around investment returns.

• Advertising Services

  growth_business_segment

  Strengths

  Q1 revenue grew 24% year over year, driven by retail media, programmatic advertising, and shifts in media consumption, with potential for high-margin expansion.

  Weaknesses

  Investors remain focused on whether advertising services growth can continue.

  Comparison

  The report lists advertising alongside AWS and e-commerce as a key long-term theme for Amazon's future outperformance.

  Risks

  Slower advertising demand, intensified competition, or platform changes affecting monetization.

Key data

• Q1'26 Revenue$181.5bnUp 17% year over year, above the high end of company guidance, Goldman Sachs' forecast, and FactSet consensus expectations.
• Q1'26 AWS Revenue Growth+28% YoYThe report believes revenue backlog and AI workloads should help sustain relatively high growth in subsequent quarters.
• Q1'26 Advertising Services Revenue Growth+24% YoYThe advertising business remains a source of high-margin growth.
• Q1'26 GAAP Operating Margin13.1%The report describes this as an all-time high operating margin and above expectations.
• 2026 Revenue Forecast$827.60bnRaised from the prior $798.34bn.
• 2026 GAAP EBIT Forecast$109.00bnRaised from the prior $103.67bn.
• 2026 GAAP EPS Forecast$9.02Raised from the prior $7.72; Q1 included the impact of approximately $16.8bn in unrealized gains on investments.
• Price Target$325Raised from $275, based on the standard multiple method and SOTP valuation.
• Market Capitalization$2.9trDisclosed in the report's Key Data.
• 3-Month Average Daily Trading Value$11.5bnDisclosed in the report's Key Data.

Impact & implications

The report's implications for AMZN are positive: the earnings beat and forecast increases strengthen the long-term growth narrative, especially around AWS, advertising, and e-commerce margin improvement. However, the market will still weigh AI- and logistics-related capital investment, SBC, fuel transportation costs, and the pressure of high capital expenditure on near-term free cash flow and margins.

Risks

• E-commerce or cloud computing growth could be affected by competition.
• Expansion of high-margin businesses such as Advertising, Cloud, third-party seller services, and subscriptions may fall short of expectations.
• Investments in AI, logistics, satellite connectivity, and other areas may pressure gross margin or operating margin.
• Higher FY26 capital expenditure may weigh on free cash flow.
• Changes in the global regulatory environment may require product or platform adjustments.
• Macroeconomic volatility and changes in risk appetite for growth stocks may affect valuation.

What to watch

• Global consumer health and its impact on Online Stores and third-party seller services.
• The pace at which AWS revenue backlog converts into revenue, as well as demand for AI computing capacity and the in-house chip Trainium.
• Whether Advertising Services can sustain growth above 20%.
• Whether Q2'26 operating profit and margin are dragged down by SBC, Leo expansion costs, and transportation costs.
• FY26 capital expenditure scale, free cash flow pressure, and long-term investment returns.
• Growth continuity for rapid commerce initiatives such as Amazon Now, Prime same-day delivery, and grocery.