Why Amazon Stock is a Pre-Earnings Buy in 2026

Amazon's stock has long been a barometer for the future of technology and commerce. As we approach 2026, the company's valuation re-rating potential is increasingly tied to the explosive growth of AWS and its AI-driven innovations. With AWS projected to grow revenue by over 30% year-over-year in 2026 and cementing its 29% market share lead in cloud computing, the case for a pre-earnings buy is compelling. This analysis unpacks how AWS's infrastructure expansion, silicon sovereignty, and AI-first strategy are reshaping Amazon's valuation narrative.

AWS: The Engine of Growth and Margin Expansion

AWS remains the crown jewel of Amazon's empire, with Q3 2025 revenue hitting $33 billion and operating margins of 34.6%. The division's annualized run rate now exceeds $132 billion, and its infrastructure expansion is accelerating. Amazon has added 3.8 gigawatts of power capacity in the past year alone, more than any other hyperscaler, and is on track to double its power capacity by 2027. Each gigawatt generates an estimated $3 billion in annual revenue, meaning incremental capacity additions in 2026 could add $12–15 billion to AWS's top line.

This growth is not just quantitative but qualitative. AWS's custom silicon, such as Trainium3, offers 4.4x higher performance and 40% lower energy consumption compared to prior generations. These advancements position AWS to dominate the AI infrastructure race, where demand is shifting from experimentation to production. The Graviton5 CPU and Amazon Bedrock AgentCore further solidify AWS's edge in cost efficiency and scalability.

AI-Driven Valuation Re-Rating

Amazon's stock valuation metrics, while currently modest, are poised for a re-rating as AI adoption accelerates. As of Q4 2025, Amazon traded at a trailing P/E of 33.1 and a P/S of 3.7. However, forward-looking metrics tell a different story. Analysts project AWS revenue growth to outpace the market, with AWS contributing to a $3.3 trillion enterprise value by 2026. This is driven by AWS's 30%+ growth trajectory, advertising revenue surging to $80–85 billion annually, and improved e-commerce margins from automation and robotics.

A critical catalyst is Amazon's silicon sovereignty strategy. By developing proprietary AI chips like Trainium3, Amazon is reducing reliance on third-party solutions and capturing higher margins. This shift is already reflected in investor sentiment: Bank of America analysts have reiterated a "Buy" rating, emphasizing AWS growth as the core driver of Amazon's long-term value. Meanwhile, a $38 billion deal with OpenAI to supply hundreds of thousands of Nvidia GPUs via AWS underscores the scalability of Amazon's AI infrastructure.

The Pre-Earnings Buy Case

Amazon's stock is currently trading at a discount to its historical averages. Its P/E of 34.2 is below the five-year average, and its P/FCF of 239.6 highlights a disconnect between stock price and cash flow generation. However, this undervaluation is temporary. With AWS projected to grow at 30%+ annually and AI workloads transitioning to production, the market will likely reprice Amazon's multiples to reflect its dominant position in cloud and AI.

Analysts have set an average price target of $297, with some estimates reaching $360. This implies a 28% upside from current levels, driven by AWS's revenue growth, advertising expansion, and margin improvements. The key is to act pre-earnings, as Q4 2026 results are expected to showcase AWS's 30%+ growth and AI-driven efficiency gains.

Conclusion

Amazon's valuation re-rating is not speculative-it's a function of AWS's infrastructure dominance and AI-first strategy. As the cloud and AI markets converge, Amazon is uniquely positioned to capture both. For investors, the pre-earnings window offers a rare opportunity to buy into a company that is not just adapting to the future but defining it.