Amazon Stock: Why 2026 Could Be the Year of Rebirth for AWS and AI Leadership

In the ever-evolving landscape of technology and cloud computing, Amazon Web Services (AWS) has long been a cornerstone of innovation and growth. However, 2026 may mark a pivotal turning point for AWS-and by extension, Amazon stock-as the division accelerates its AI-driven transformation and reclaims its position as a leader in the cloud sector. With robust revenue projections, strategic infrastructure investments, and a valuation that appears undervalued relative to its long-term potential, Amazon is poised to deliver outsized returns for investors who recognize the inflection points ahead.

AWS: A Catalyst for Reaccelerated Growth

AWS, Amazon's most profitable division, is projected to drive the company's stock performance in 2026. Analysts at Zacks estimate AWS revenue will reach $156 billion in 2026, slightly exceeding the Street's $155 billion forecast. This growth is already gaining momentum: in Q3 2025, AWS reported a 20.2% year-over-year revenue increase-the fastest expansion since 2022-highlighting its ability to capitalize on surging demand for AI workloads. Bank of America's Justin Post underscores this trend, noting that AWS's aggressive infrastructure investments and AI-focused product launches are critical to sustaining this trajectory.

The division's recent innovations, such as the Graviton5 CPU and Trainium3 UltraServers, are not just incremental upgrades but strategic moves to dominate the AI inference market. These tools, combined with agentic AI development platforms, position AWS as a cost-efficient provider for enterprises scaling AI applications. As AI adoption accelerates across industries, AWS's ability to deliver tailored, high-performance solutions could widen its margin advantage over competitors.

Strategic Valuation Turnaround

Amazon's stock valuation has historically been a point of contention for investors. As of December 2025, the stock trades at a forward P/E ratio of 31.21x, below its five-year average of 51.51x. This discount reflects lingering uncertainties about AWS's AI positioning but also presents an opportunity for multiple expansion. The company's forward EV/EBITDA multiple of 11x further underscores its undervaluation relative to peers like Microsoft, which trades at 23x.

This valuation gap is narrowing as AWS's competitive edge in AI becomes clearer. For instance, AWS's $200 billion cloud backlog-a metric that represents unfulfilled customer commitments- provides substantial revenue visibility and reinforces the durability of its growth story. Analysts argue that as AWS's AI infrastructure gains traction, the market will begin to price in its long-term profitability more aggressively, unlocking value for shareholders.

AI-Driven Cloud Growth: A Structural Tailwind

The structural shift toward AI is a megatrend that AWS is uniquely positioned to exploit. Unlike rivals that rely on general-purpose cloud services, AWS has embedded AI into its core offerings. Its Trainium chips, optimized for machine learning training and inference, are already attracting enterprise clients seeking to reduce computational costs. Meanwhile, AWS's large language model (LLM) development tools are enabling businesses to build custom AI solutions without needing in-house expertise, further expanding the division's addressable market.

Capital expenditures for 2026 are expected to rise sharply to support this AI-driven expansion. According to Q4 2025 guidance, Amazon plans to allocate significant resources to infrastructure upgrades, ensuring it can meet the surging demand for AI workloads. This proactive approach not only strengthens AWS's technical capabilities but also cements its role as a foundational player in the AI era.

The Investment Case for 2026

For investors, the convergence of AWS's AI leadership, favorable valuation metrics, and structural growth tailwinds makes Amazon an attractive long-term bet. The Zacks Consensus Estimate projects Amazon's 2026 earnings at $7.85 per share, a 9.46% increase from 2025. Coupled with a projected 12% revenue growth to $801 billion, these figures suggest the company is on track to deliver consistent top-line and bottom-line expansion according to Q4 2025 guidance.

Moreover, the stock's current discount to its historical valuation multiples implies room for appreciation as AWS's AI-driven growth gains broader recognition. While short-term volatility remains a risk, the long-term fundamentals-particularly AWS's $200 billion backlog and its first-mover advantage in AI infrastructure-provide a durable foundation for value creation.

Conclusion

2026 could well be the year Amazon redefines its narrative. AWS's reaccelerated growth, powered by AI innovation and strategic infrastructure investments, is not just a temporary spike but a structural shift that aligns with the broader digital transformation of global enterprises. For investors willing to look beyond near-term uncertainties, Amazon's undervalued stock and AWS's leadership in the AI cloud space present a compelling opportunity to participate in one of the most transformative industries of the decade.