AWS acceleration can fund record buildout and lift margins near 14% in FY27. Target implies 13% upside to $294.15.
Key points
- $42.2 billion of cloud sales in Q2 FY26, up 37% in Q2 FY26 from a year earlier.
- $54.2 billion of buildout spend in Q2 FY26, about twice the $27.5 billion of operating profit in Q2 FY26.
- $496 billion of backlog in June 2026, or signed cloud work not yet billed, with 6.4 years of average life in June 2026.
The call
The price looks full for slower growth. At $259.90 a share in October 2026, the operating business is valued richly. That level needs about 28 times profit for the 12 months to June 2026.
Quarterly revenue with forecast ($ billions)- Revenue reported
- Muse forecast
Source: SEC XBRL facts to Q2 FY26; Q3 FY26E to Q2 FY27E are Muse forecasts.
I expect growth to meet that bar. Cloud sales were $42.2 billion in the June quarter. Backlog, or signed work not yet billed, was $496 billion then. Faster delivery and ads can hold profit per sales dollar near 14% next year as new power turns into sales.
Capex now exceeds operating income ($ billions)Source: SEC XBRL facts. Capex is gross property purchases; Amazon TTM uses net definition.
Valuation
| Driver | Estimate |
|---|
| Sales in FY27 | $940 billion |
| Operating profit in FY27, or sales minus running costs | $128 billion |
| Operating value at 24 times profit in FY27 | $3,072 billion |
| Plus AI stakes less net debt in June 2026 | $164 billion net add |
| Target over 11.0 billion shares in FY27 | $294.15 a share |
A 24 times multiple in FY27, or price paid per dollar of profit, fits a double digit grower with more cloud mix in FY27. It sits below the 28 times paid for the year to June 2026. The gain covers a soft quarter to June 2027, which fits a buy.
Risks
- Cloud growth stalls if power limits bind, seen in flat billed usage in any quarter to September 2027.
- Retail profit slips if shipping costs jump, seen in rising cost per unit in any quarter to September 2027.
- Cash strain lasts if buildout stays high, seen in negative free cash in any quarter to September 2027.
What would change my mind
I would turn cautious if cloud sales growth falls below 20% in any quarter to September 2027 without a power excuse tied to that quarter.