AWS on Track to Hit $1 Trillion Revenue by 2035: Morgan Stanley

Morgan Stanley analysts are projecting Amazon Web Services (AWS) to reach $1 trillion in revenue by 2035, driven by expansion of computing power and improvements in monetization efficiency.

The report estimates that AWS's computing capacity will increase from 14 GW in 2025 to 120 GW by 2035, with a key variable determining the timing of reaching $1 trillion in revenue being the improvement in monetization efficiency per incremental watt. Currently, AWS earns approximately $8 per incremental watt, but Morgan Stanley expects this to rise to $12 per watt.

Under the base-case scenario, which assumes 8 GW of annual computing capacity expansion and a gradual increase in monetization efficiency to $12 per watt, AWS revenue is expected to grow from about $176.9 billion in 2026 to approximately $249.2 billion in 2027, representing a year-on-year growth of around 41%.

The report also projects that the profit margin of AWS's AI business may follow the growth trajectory of its core cloud services, with long-term EBIT margins expected to reach approximately 30%. This would result in an EBIT of around $300 billion for AWS and consolidated EBIT of approximately $500 billion between 2034 and 2036.

Morgan Stanley believes that Amazon's current share price does not fully reflect the company's long-term earnings potential, with the report noting that the current valuation is equivalent to approximately 11 times its expected 2035 EBIT, discounted to 2028 at a 10% WACC. This represents a roughly 50% discount compared to the average valuation level of around 23x for hyperscale cloud computing and retail peers.