With Amazon’s (AMZN) Q1 earnings to be announced on April 29, the stock still looks like a buy at current levels for key reasons. While consensus earnings per share (EPS) of about $1.62 implies a relatively modest 2.5% year-over-year growth, the projected revenue of $177.1 billion points to a robust 13.7% year-over-year growth.
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This divergence between earnings and top-line growth is no accident. Rather, it reflects a business that continues to invest heavily — particularly in artificial intelligence (AI) infrastructure and Amazon Web Services (AWS) capacity — while underlying demand remains robust. From this perspective, the current setup looks less about slowing fundamentals and more about a timing mismatch between cloud infrastructure investment and monetization.
If that’s the case, then the key question becomes what the market may still be overlooking about this tech giant. In my view, three key factors help explain my bullish stance on AMZN heading into Q1.
Contracted Demand Reduces Investment Risk
One of the most important points for understanding Amazon’s current situation is that its investment cycle, projected to spend roughly $200 billion in capex through 2026, is not being carried out blindly. In a recent letter to shareholders, CEO Andy Jassy highlighted that AWS ended the last quarter with a backlog of approximately $244 billion. This represents 40% year-over-year growth and reflects revenue that has already been contracted and will be recognized over the coming years.
Perhaps more important than the headline number itself is what it signals. The backlog is largely composed of long-term contracts with corporate clients and governments, many of which are directly tied to the adoption of AI infrastructure. In other words, this is not potential demand, but consumption that has already been committed.
Yet Amazon continues to reiterate quarter after quarter that demand remains above available capacity. As a result, AWS has been monetizing infrastructure almost as quickly as it can bring it online. In this context, the market’s perceived risk that elevated capex represents a gamble starts to look less relevant.
Judging by Amazon’s stock performance over the past month, which has been rebounding more consistently since hitting levels near $199 in late March, it seems the market is beginning — albeit gradually — to adjust this view. The disconnect between perceived risk and the actual demand outlook is becoming increasingly difficult to ignore.
AWS Re-Acceleration Points to a Larger AI Cycle Ahead
As its most profitable and scalable segment, AWS remains the core of Amazon’s thesis heading into Q1. More specifically, markets have realized that the AI opportunity could be much bigger than expected. This insight partly explains why Amazon stock has underperformed so far this year.
To begin with, what initially looked like a cyclical slowdown in cloud quickly started to shift into a re-acceleration story. AWS net sales growth came in at 19% in Q4 2024, only to fall to 17% in the following two quarters. After re-acceleration to 20% in Q3 2025, growth picked up again to a strong 24% year-over-year in Q4 2025. According to management, this re-acceleration was driven not only by traditional workloads but also by an entirely new layer of demand for AI infrastructure.
Also, AWS’s operating margins took a slight hit, coming in at 35% in Q4 2025. Though up from 34.6% in Q3 2025, it was still well below the 39.5% reported in Q4 2024, when growth was nearly 500 basis points lower.
Why should one remain bullish despite these numbers? I would argue that, first of all, this kind of acceleration at scale is rare. A 24% year-over-year growth rate on a $142 billion run-rate business is not normal and points much more to a structural shift than to a simple cyclical recovery.
If margins are coming down for the “right” reason — not because of competitive pressure, but because the company is investing heavily in AI capacity — then what the market sees as a short-term problem may actually be a mispricing. In practice, this feels less like margin pressure and more like the market penalizing what could be a much larger long-term growth opportunity.
Valuation Does Not Fully Reflect Future Earnings Power
The consensus currently assumes that Amazon will report EPS of $7.74 in 2026, $9.38 in 2027, and $11.73 in 2028 — implying year-over-year growth of approximately 8%, 21%, and 25%, respectively. Given that the market is currently pricing Amazon at around $2.68 trillion, at the time of writing, that would place AMZN trading at roughly 31x P/E in 2026, 25.5x in 2027, and 20.4x in 2028.
Considering that Amazon has traded since 2024 — arguably the early innings of the AI boom — at an average forward P/E of around 32x, I believe a more reasonable multiple over the next two to three years would be closer to 30x earnings. Assuming the $9.38 consensus EPS for 2027 remains broadly in line with current expectations, this would imply a share price of approximately $281, representing an upside of around 14% from current levels.
Is AMZN a Buy, According to Wall Street Analysts?
Wall Street’s outlook on AMZN shares remains clearly bullish: of the 45 ratings issued over the past three months, 42 are Buy recommendations, while only three are Holds, forming a Strong Buy consensus rating. The average price target stands at $284.76 per share, implying a potential upside of about 14.5% from current levels.
AMZN Still Skewed to the Upside
Amazon is set to report its Q1 results at a time that I view as constructive. Concerns about excessive capex have eased, given a substantial backlog grounded in real demand rather than speculation. Additionally, the reacceleration in AWS net sales points to continued momentum. Margins also appear likely to hold up relatively well, as incremental workloads tend to be higher-margin.
Finally, valuation remains anchored in realistic expectations for bottom-line growth over the next couple of years. The forward multiple also appears broadly in line with where Amazon has historically traded, suggesting there is still upside potential.
These reasons, while not exhaustive, are some of the key factors leading me to assign a Buy rating to AMZN ahead of its earnings release.