Amazon's AWS Growth Sparks Bullish Sentiment

Amazon's Q2 fiscal 2026 results have given investors reason to be bullish about the company's future. The stock has been upgraded to a BUY with a $342 price target, implying a 32% upside from its current price of $259.45.

The growth in Amazon Web Services (AWS) is driving this optimism. AWS grew 37% to $42.23 billion in Q2, its fastest pace in 18 quarters. This has led to an AI backlog of $496 billion, which justifies Amazon's premium valuation over rivals Microsoft and Alphabet.

However, there are some concerns that need to be addressed. The company spent a record $54.2 billion on capital expenditures (capex) in the quarter, driving free cash flow negative and pushing long-term debt to $119.1 billion. This could be a bear risk for investors.

Despite these concerns, analysts remain optimistic about Amazon's future. They point to the company's AI story, which is compounding and justifying the premium valuation. The bull case at $392.40 becomes realistic if AWS margins hold near 39.4%.