Analyst Predicts Amazon as a Major Winner in AI Revolution
Analyst Rohit Kulkarni from Roth Capital Markets has shared an optimistic outlook for Amazon, assigning a “Buy” rating and setting a 12-month target price of $250.00. This prediction comes as the company prepares to announce its third-quarter earnings on October 30, after market close.
Amazon’s Growth Potential in AI
As Amazon continues to solidify its position in the technology sector, Kulkarni has increased growth projections for Amazon Web Services (AWS). Following several new AI Cloud product announcements, he anticipates stronger customer engagement and accelerated growth in AWS.
Forecast and Valuation
- Projected AWS revenue growth of 18.6% and 19.5% year-over-year in the second half of 2025.
- Increased from previous estimates of 17.4% growth during the first half of 2025.
- Amazon’s stock, priced at $205 per share, has a projected 2026 price-to-earnings ratio of approximately 25x.
Kulkarni notes that Amazon’s share in Anthropic, estimated at 12–14%, is expected to positively influence third-quarter earnings per share through potential valuation adjustments. Additionally, he advises stakeholders to monitor updates on AWS Trainium 3 and Project Rainier by the end of 2025.
Key Developments and Challenges
Trainium 3 is anticipated to significantly outperform its predecessor, being built on a 3-nanometer process, while Project Rainier’s rollout aims to enhance AWS’s data-center capabilities starting in the fourth quarter. However, challenges remain, as retail margins might feel the strain from tariffs and upcoming satellite launches from the Project Kuiper program, which has completed six missions with 153 satellites currently in orbit.
- Project Kuiper’s satellite missions: 6 completed.
- Total satellites in orbit: 153.
There are concerns regarding pricing impacts that have not fully materialized. Kulkarni remarked that Amazon hasn’t fully implemented significant cost offsets yet. During July, Amazon paused its spending on Google ads for a month. Kulkarni described this as an “experiment” aimed at enhancing attribution and pricing strategies linked to updates in Amazon’s in-house search tool, Rufus, and its sponsored listings.
Continued Demand for Cloud Services
The demand for both AI and non-AI cloud solutions on AWS remains strong, particularly as generative AI applications progress beyond the experimental phase and enterprises modernize their infrastructure. Enhanced capacity from Project Rainier could substantially boost AWS’s growth in the second half of 2025.
Financial Performance Expectations
Kulkarni predicts Amazon achieving adjusted EBITDA of $165.1 million on revenues of $707.9 million in fiscal 2025. This performance is expected to improve to an EBITDA of $198.4 million on revenues of $782.1 million in fiscal 2026, reflecting a positive trajectory for the company.
