JPMorgan Sees Opportunity in Amazon's Cloud Infrastructure Story

JPMorgan analysts see an opportunity in Amazon's post-earnings pullback, despite concerns about AWS's slower growth and thinner margins. They believe the market got it wrong, and the company's big AI bet is a long-term play. The analysts recommend buying the stock, citing Amazon's record-breaking capital expenditures and CEO Andy Jassy's defense of the strategy.

Amazon (AMZN) posted strong Q2 results, with overall sales jumping 13% to $167.7 billion and net income surging to $1.68 EPS, exceeding estimates by an eye-popping $5.60 billion. However, the market was largely unfazed, with shares pulling back sharply due to concerns about Amazon Web Services (AWS) lagging in growth compared to competitors. AWS sales grew 17.5% to $30.9 billion, but this underwhelmed investors who expected more, especially considering the backdrop of AI-fueled cloud expansion.

JPMorgan analysts, led by veteran analyst Doug Anmuth, see an opportunity in the post-earnings pullback. Despite the market's concerns, Anmuth maintains a Buy rating on Amazon stock and has boosted his price target from $255 to $265, implying a 23% upside from current levels. He believes the market got it wrong, and the company's big AI bet is a long-term play. Anmuth feels investors should "Buy the pullback," citing Amazon's record-breaking capital expenditures of $31.4 billion and CEO Andy Jassy's defense of the strategy.

AWS is far from purely a segment; it's arguably the profit core and strategic anchor for the entire business. It's responsible for close to 60% of Amazon's operating income, with AWS running at an annualized sales pace above $123 billion. That scale gives it the profile of a standalone cloud giant, one that underpins the bulk of Amazon's enterprise value. AI is rapidly deepening that role, with AWS investing heavily in generative and agentic AI. While margins have compressed recently due to infrastructure investments, these bets are about long-term dominance.

Despite the concerns, JPMorgan and other analysts like those at Citi are bullish on Amazon's long-term prospects. They believe the selloff doesn't match the broader story, and the company's aggressive investments in AI and infrastructure are poised to pay off in the long run.

References:
[1] https://finance.yahoo.com/news/jpmorgan-drops-3-word-verdict-164700837.html
[2] https://www.thestreet.com/technology/jpmorgan-drops-3-word-verdict-on-amazon-stock-post-earnings