Amazon stock will shine in 2026, this analyst says

In a Jan. 26 note, Roth Capital Markets analyst Rohit Kulkarni reiterated a “Buy” rating on Amazon (Amazon Stock Quote, Chart, News, Analysts, Financials NASDAQ:AMZN) and raised his 12-month price target to US$295 from US$270, reflecting higher forward assumptions and the introduction of 2027 estimates ahead of the company’s fourth-quarter earnings report scheduled for Feb. 5 after market close.

Kulkarni said the higher target is based on a sum-of-parts valuation and implies roughly 30 times his 2027 earnings estimate. He said Roth is modestly increasing its 2026 assumptions and believes the market is underestimating margin upside tied to workforce reductions late in 2025 and the potential for additional layoffs in early 2026.

“We believe the Street is underestimating margin relief from 4Q ’25 layoffs and likely additional layoffs in 1Q ’26,” Kulkarni said, adding that near-term developments around the Trainium 3 launch, early impacts from Rufus on commerce conversions, and greater clarity around the AWS–OpenAI relationship could help reframe the AI narrative around the stock.

He called Amazon his top mega-cap pick for the first half of 2026.

Looking to the upcoming earnings release, Kulkarni said Roth expects a modest fourth-quarter beat versus consensus and believes the shares would react positively if revenue and operating income exceed roughly US$211-billion and US$25-billion, respectively. For the first quarter of 2026, he said guidance implying revenue near US$176-billion and operating income around US$22-billion would also be viewed favourably.

AWS remains a central focus, with Kulkarni forecasting accelerating year-over-year growth through the first half of 2026, reaching about 23% in both the first and second quarters. He said fourth-quarter AWS growth above 22% would be a clear positive, while noting that recent capital spending should continue to support cloud acceleration with a typical six-to-nine-month lag. He estimates Amazon spent about US$34.5-billion in capital expenditures in the fourth quarter and expects the company to guide to higher absolute CapEx in 2026.

On the retail side, Kulkarni said the Street continues to underestimate margin expansion potential, driven by advertising growth, logistics efficiencies, lower year-over-year cost comparisons and workforce actions. He estimates North America and International retail margins could expand by roughly 130 basis points and 120 basis points, respectively, in 2026.

Kulkarni also pushed back on investor skepticism around Amazon’s in-house AI chips, saying Trainium is aimed at a large and underappreciated segment of the compute market. He noted that Amazon has disclosed a multibillion-dollar revenue run rate for Trainium, with more than one million chips in production and over 100,000 customers, while Anthropic is already using Trainium2 for training workloads.

Roth forecasts that Amazon will generate about US$165.8-million in Adjusted EBITDA on revenue of roughly US$715.0-billion in fiscal 2025, improving to approximately US$209.7-million in Adjusted EBITDA on revenue of about US$797.6-billion in fiscal 2026.

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