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Just For You
Amazon's $350 Price Target Faces a Big Earnings Test
Reported by Sam Quirke. Posted: 10/26/2026.
Key Points
- Morgan Stanley named Amazon its Top Pick on Oct. 19, raising its price target to $350 on AWS growth potential, but gains quickly faded amid a broader market pullback.
- Amazon faces an important earnings test on Oct. 29, with investors watching AWS growth, its nearly $500 billion backlog, and whether heavy capital spending will ease.
- Despite a compelling long-term bull case built on AWS, advertising, and Prime, roughly $220 billion in planned 2026 spending has pushed free cash flow negative.
- Special Report: Green, red, gold
Amazon.com Inc. (NASDAQ: AMZN) has given its shareholders little to cheer about this year.
Despite posting record revenue, the tech giant’s stock has gained barely 10% so far in 2026 and sits roughly where it was 12 months ago. It’s safe to say investors have been feeling a bit hard done by and are due for some good news.
Earlier this week, it arrived—or at least appeared to. On Monday, Oct. 19, Morgan Stanley named Amazon its Top Pick, laying out a path for Amazon Web Services (AWS) to grow to $1 trillion in revenue—a scenario that, if it materializes, could more than double Amazon’s current share price.
Dodgy Timing
Unfortunately, the timing proved awkward. While the stock initially popped on the news, it had given back nearly all those gains by the close of trading on Thursday, Oct. 22. It seems Amazon, like most of its tech peers, has been swept up in a broad market pullback driven by higher oil prices and fresh jitters about AI spending. For context, the stock is trading around $250 again, about 12% below the record high it set in July.
There’s an interesting tension at play here. Bulls like Morgan Stanley clearly see massive long-term potential, while the market is nervous about the stock’s near-term trajectory. With earnings due next week on Oct. 29, the question is whether to buy into the optimism before the report or wait for proof.
The Bull Case Behind the Update
Morgan Stanley’s call rests on a simple idea: Amazon’s most profitable engines are all firing at once. In his update, analyst Brian Nowak argued that the cloud unit is becoming a rare “Rule of 90” business, where growth and margins combine to deliver exceptional returns. Alongside reiterating his Overweight rating, Nowak raised his near-term price target to $350, pointing to about 40% upside from the current share price.
The upside potential looks real, not merely hoped for. AWS reportedly has a cloud backlog of nearly $500 billion, suggesting the constraint is how quickly it can build capacity, not whether customers will show up. Morgan Stanley’s bull case isn’t just about cloud, either. Nowak noted that Amazon’s high-margin advertising business continues to grow, Prime membership is deepening customer loyalty, and a fast-expanding fleet of warehouse robots is set to generate billions in annual fulfillment savings. Add it all up, and it’s easy to see why many other analysts have also been raising their price targets.
Why the Stock Won’t Cooperate
So why aren’t the shares trending up? Part of the answer is the broader market backdrop. A jump in oil prices has driven the latest pullback, while the broader caution reflects mounting worries about the sheer sums that AI hyperscalers, Amazon chief among them, are pouring into data centers.
Amazon is on track to spend around $220 billion this year, a bill so large it has pushed the company’s free cash flow into the red. Investors are essentially being asked to fund an enormous build-out now on the promise of profits later. After a year in which the stock has gone almost nowhere, their patience is clearly wearing thin.
What the Report Has to Show
This makes Amazon’s Oct. 29 earnings an important test, and the headline figure will matter far less than the details beneath it. Investors will watch closely to see whether AWS growth beats the already-high bar, whether that giant backlog is still expanding, and whether Amazon’s cloud margins are holding up despite the high costs of all those new data centers.
Just as important will be the spending plans. The market will want to see Amazon hold the line on future capital spending and provide some sign that free cash flow can recover, rather than signal that the cash drain will continue for years to come. Reassurance on that front would likely do more for the stock than any single earnings or revenue beat.
Buy Now? Or Wait?
So is there a case for stepping in before the report? Yes, and a reasonable one at that. The long-term story is compelling: AWS looks to be reaccelerating, its vast backlog all but locks in years of growth, and Amazon’s other businesses are serious profit machines in their own right. Wall Street’s growing enthusiasm, capped by Morgan Stanley’s Top Pick call, isn’t built on thin air.
But the recent price action is hard to ignore. Jitters now swirling around the broader AI trade have raised the bar for Amazon’s report, and with so much suddenly in question across the sector, anything less than a convincing quarter could sting. For investors who believe in the AI build-out, the smarter stance heading into next week’s report may be cautious optimism: bullish on where Amazon is heading, but alert to how bumpy the road there could be.
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