Wells Fargo Upgrades Amazon to Buy on AWS Revenue Boost from Rainier Project

Wells Fargo has upgraded its rating for Amazon (AMZN.US) from "hold" to "buy," citing the potential revenue boost for Amazon Web Services (AWS) from the Rainier project. This data center initiative, located in Indiana, is dedicated to Anthropic computing and is expected to commence operations in January 2026.

The Rainier project, with a capacity of 2.2 gigawatts, is anticipated to generate approximately 14 billion dollars in annual revenue for AWS once it reaches full operational capacity. This significant increase in capacity is projected to accelerate AWS's revenue growth, particularly in the years 2026 and 2027. Wells Fargo has revised its revenue forecasts for AWS, increasing the 2026 projection by 3% and the 2027 projection by 7%. This adjustment reflects the bank's confidence in the Rainier project's ability to drive substantial revenue growth for AWS.

Despite potential market share losses in 2025, the increased capacity from the Rainier project is expected to offset these losses and contribute to a net positive impact on AWS's revenue. This strategic investment in data center infrastructure is seen as a critical move to maintain and enhance AWS's competitive position in the cloud computing market.

The Rainier project is part of a broader strategy by Amazon to expand its cloud computing capabilities and meet the growing demand for cloud services. The project's completion and full operational capacity are expected to provide a significant boost to AWS's revenue, reinforcing its position as a leader in the cloud computing industry. The increased capacity will enable AWS to offer more robust and scalable cloud solutions to its customers, further driving its revenue growth.

However, the Rainier project is also expected to exert pressure on AWS's profit margins. The project is anticipated to have a mild impact on the profit margin in 2026, approximately 50 basis points. Nevertheless, the increased revenue is expected to mitigate this impact through the leverage of fixed costs. Despite this, the profit margin for 2027 is still expected to face pressure, with market expectations for the profit margin to remain stable at the 2026 level of 34.3%.

In summary, the Rainier project is poised to be a game-changer for AWS, with the potential to significantly boost its revenue and market position. The upgrade in Amazon's rating by Wells Fargo underscores the financial community's confidence in the project's ability to deliver substantial returns and drive long-term growth for AWS.