AWS Rebounds: AI Fuels Growth Amidst Massive Spending

Amazon's stock is garnering renewed Wall Street interest as its Amazon Web Services (AWS) division experiences reaccelerated growth, largely propelled by surging demand for artificial intelligence workloads. This resurgence is occurring as the company commits to substantial capital expenditures, planning to invest approximately $200 billion in 2026 for AI infrastructure, chips, and robotics. This ambitious spending plan represents a significant increase from previous years, with 2025 capital expenditures rising 59% to $131.8 billion.

Despite the increased investment weighing on near-term free cash flow, which fell by 70% in 2025 to $11.2 billion, Amazon's advertising business is emerging as a crucial profit driver. In Q4 2025, advertising revenue climbed 23% year-over-year to $21.3 billion. This less capital-intensive segment provides a strong, high-margin revenue stream that helps offset the considerable costs associated with building out cloud infrastructure.

The company's dual strategy focuses on leveraging AI-driven demand in AWS while its advertising segment scales into a larger profit contributor. Analysts are raising price targets, anticipating AWS growth to reach 37% by 2027 as major AI partnerships solidify. The success of this strategy hinges on AWS sustaining growth above 20% while maintaining strong margins, ensuring that the extensive infrastructure outlays translate into sustainable returns.