Amazon Web Services (AWS) (NASDAQ:AMZN) could experience growth above 20% in 2026 as the company expands capacity to meet increasing demand, according to Morgan Stanley.
In an updated analysis of capital expenditures and projected data center space, the bank’s analysts said they now have “more conviction that AWS growth has the potential to accelerate to 20%+ in ‘26.”
Morgan Stanley added that such an acceleration would be “ahead of our base model and key driver of AMZN’s multiple,” with a base-case valuation of $300 per share and a bull-case scenario of $350.
The firm highlighted that “AWS’s forward growth and competitive positioning in this early GenAI era remains the key investor debate and driver of AMZN’s multiple.”
Rising demand from companies deploying generative AI workloads, including Anthropic, combined with broader adoption of cloud computing, is creating a robust backlog, the analysts noted.
They also cautioned that AWS must navigate “capacity constraints (data center builds, delivery of chips, racks, cables, power, etc.), which our new analysis suggests AWS is working through… which we view is a positive signal of faster AWS revenue growth ahead.”
Morgan Stanley further observed a shift in capital spending trends. While Microsoft’s Azure outspent AWS by $5–6 billion per quarter in 2023–24, the analysts said “AWS is now catching up, as we expect AWS and the other hyperscalers all to grow their respective capex by ~$33bn in ‘25.” Elevated spending is projected to continue into 2026.
Despite this ramp-up, the note warned that “overall capex intensity at AWS continues to lag Azure,” suggesting that further increases in AWS investment could be needed.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.