KeyBanc Capital Markets is doubling down on Amazon.com’s (NASDAQ:AMZN) AI infrastructure splurge, arguing that fears of overbuilding are misplaced as AWS growth re‑accelerates and long‑term compute demand hardens.
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AMZN – Overweight, $335 Price Target
In a new note, the firm reiterates its Overweight rating on Amazon and nudges its price target up to $335 from $330, based on 25.5 times 2028 earnings, as it extends its valuation horizon and edges estimates above consensus into 2028.
At the center of the call is a simple trade‑off: KeyBanc sees near‑term margin pressure as the cost of entrenching AWS as a primary supplier of scarce AI compute.
The analysts raise 2026 and 2027 total net sales by less than 1% but mark AWS meaningfully higher, modeling 31% year‑over‑year growth in both years, versus Street expectations closer to the low‑30s.
The analysts also lift 2026 and 2027 operating income by 4% and 8%, respectively, and introduce 2028 projections that put revenue at about $1.08 trillion and operating income at roughly $178.6 billion.
Capex is where the call diverges sharply from consensus. Management has already signaled that faster AWS growth requires more up‑front spending, and KeyBanc leans into that message, penciling in 2027 and 2028 capital expenditures of $331 billion and $356 billion.
That compares with Street estimates of $235 billion and $241 billion, implying KeyBanc is underwriting a materially steeper investment curve as Amazon races to build data centers and secure power for AI workloads.
AWS Backlog Swells
The firm ties that capex stance directly to a swelling AWS backlog and a series of long‑dated power and capacity deals. It expects AWS backlog to reach around $485 billion, driven largely by a $100 billion, 10‑year agreement signed with Anthropic in April.
Additional commitments from OpenAI and Anthropic — 2GW of power over eight years and 5GW over 10 years, respectively — are framed as structural demand signals, reinforcing the view that incremental compute remains both scarce and valuable.
The Takeaway
While Meta Platforms’ (NASDAQ:META) talk of monetizing excess capacity has stoked worries about industry overbuild, KeyBanc argues those moves actually underscore the strength of demand and pricing for high‑end compute.
In that context, Amazon’s spend‑now posture becomes a rational strategy to deepen an AI infrastructure moat, even if it compresses near‑term margin upside.
KeyBanc’s message to investors: tolerate the capex surge and focus on what the firm sees as a durable, high‑growth AWS earnings stream stretching toward the end of the decade.
Photo: PJ McDonnell / Shutterstock
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