Analysts at Jefferies said they have become more constructive on Amazon.com Inc (NASDAQ:AMZN) following CEO Andy Jassy’s latest shareholder letter, pointing to improving visibility on artificial intelligence (AI) growth and long-term returns from elevated investment.
In a note to clients, the brokerage reiterated its ‘Buy’ rating and $300 price target, arguing that key disclosures in the letter further support a bullish outlook on the company’s cloud and AI trajectory.
Shares of Amazon traded up more than 2% at $239 on Friday morning.
The analysts highlighted the acceleration in Amazon Web Services (AWS). According to Jefferies, the letter revealed AWS’s AI revenue run-rate has now surpassed $15 billion in the first quarter of 2026, up from what had previously been described only as “multi-billion-dollar” scale. The firm wrote that this indicates momentum is building more quickly than widely perceived.
While Amazon has often been viewed as trailing other hyperscalers in AI, Jefferies wrote that the company is “catching up at the right pace,” supported by a full-stack and model-agnostic architecture designed for enterprise deployment.
The analysts highlighted management’s expectation to double total power capacity by the end of 2027, noting that demand is already outstripping supply and that AWS is “monetizing capacity as fast as it is installed.”
Jefferies added that this dynamic improves near-term demand visibility and strengthens confidence in a sustained acceleration as new capacity comes online.
The firm also addressed investor concerns around Amazon’s rising capital expenditures. Following guidance for roughly $200 billion in fiscal 2026 capex, the shareholder letter emphasized that much of the spending is backed by committed customer demand rather than speculative investment.
Jefferies described the resulting pressure on free cash flow (FCF) and return on invested capital (ROIC) as temporary, stating that AWS’s investment cycle typically “front-loads” spending six to 24 months ahead of revenue generation. As a result, the brokerage expects a potential inflection in both FCF and ROIC in the 2027–2028 period as capacity is utilized.
The analysts pointed to large agreements, including one with OpenAI, alongside other undisclosed contracts, as evidence that a “substantial portion” of planned capacity is already spoken for. In their view, this supports the argument that current cash flow pressure is largely a timing issue rather than a structural concern.
Another area highlighted by the analysts was Amazon’s growing investment in custom silicon. Jefferies wrote that chips such as Trainium and Graviton are becoming a “structural advantage” for AWS, helping improve price-performance while supporting margins. Management indicated that newer generations of these chips are already heavily subscribed, even ahead of full availability.
The brokerage estimates Amazon’s internal chips business now exceeds a $20 billion revenue run-rate, growing at triple-digit rates year over year. At scale, Jefferies believes this could translate into “several hundred basis points” of long-term margin uplift and significant capital expenditure savings.
Beyond cloud and AI, the analysts also pointed to progress in Amazon’s grocery segment. The shareholder letter noted that the business surpassed $150 billion in gross sales in 2025, making Amazon the second-largest grocer in the United States.
Jefferies noted that rapid growth in same-day delivery of perishable goods, up more than 40-fold since early 2025, demonstrates improving customer adoption and operational efficiency, even if margins remain structurally lower than other segments.
Overall, Jefferies concluded that the updated disclosures provide greater clarity on Amazon’s long-term growth and profitability profile.
“Incremental positive reads on AI scale, custom silicon, and demand-backed capex investments support confidence in AWS’s long-term growth and margin trajectory,” they wrote, adding that the stock’s risk-reward profile remains compelling.