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Investing.com -- Amazon Web Services (AWS) could see growth accelerate above 20 percent in 2026 as capacity expansion begins to match rising demand, according to Morgan Stanley.
In a new analysis of capital expenditures and expected data center square footage, the bank’s analysts said they have “more conviction that AWS growth has the potential to accelerate to 20%+ in ‘26.”
Morgan Stanley added that this would be “ahead of our base model and key driver of AMZN’s multiple,” with a base case valuation of $300 and a bull case of $350.
The bank 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.”
Demand from companies scaling generative AI workloads, including Anthropic, as well as broader adoption of cloud computing, is feeding into a strong backlog, Morgan Stanley said.
However, it noted AWS must work through “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 also pointed to a shift in capital spending trends. While Microsoft’s Azure outpaced AWS in 2023–24 capex by $5 billion to $6 billion per quarter, 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 expected to continue into 2026.
Despite the ramp-up, “overall capex intensity at AWS continues to lag Azure,” the note cautioned, suggesting further upward revisions to AWS investment may be needed.