AWS Growth Forecasted to Soar Past Expectations

Amazon's (NASDAQ:AMZN) AWS business is expected to compound significantly in the coming years, according to TD Cowen. The firm predicts that AWS revenue will reach $165 billion by 2026, which is 3% above Wall Street consensus, and $222 billion by 2027, 11% above consensus.

The estimate is based on several key drivers of Amazon's stock performance, including the acceleration of AWS growth, custom silicon creating a structural cost advantage, and enterprise AI adoption still in its early innings. TD Cowen believes that the divergence between its estimates and consensus will widen as enterprise AI workloads accelerate through 2026.

To reach TD Cowen's target, Amazon must maintain or accelerate its growth rate while operating margins expand. The firm notes that three conditions are crucial: AWS must sustain its growth trajectory; the $200 billion CapEx cycle must translate into revenue faster than the market currently models; and enterprise migration from on-premise infrastructure to cloud must continue broadening beyond AI labs.