Amazon.com, Inc.

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Somewhat Bullish +50

Amazon.com’s (AMZN) 2026 Could Mark an AI Script Flip, Evercore Says

AI-generated analysis

📈 Evercore ISI analyst Mark Mahaney reiterated an Outperform rating on Amazon (AMZN) with a $335 price target.

🔄 The firm predicts AMZN could flip from an AI laggard to an AI winner by 2026, similar to Google's trajectory in 2025.

💰 Evercore expects Q4 revenue of $211 billion (up 12% YoY) and operating income of $24.6 billion at 11.7% margin.

🛒 Retail spending trends are supportive, though Amazon-specific sales indicators currently appear softer than expected.

☁️ Analysts will watch for AWS growth acceleration with a clear backlog as a key investment metric.

💡 Ad revenue durability is also considered important for the stock's long-term outlook.

🏭 Evercore models capital spending at $125.17 billion for FY25, which is 61% higher year-over-year.

📉 Free cash flow (FCF) is modeled at $31.6 billion for FY25, implying a 4.4% FCF margin.

🧠 Evercore maintains Amazon as its number one Large Cap Net Long position.

🔮 Operating income is expected to show greater upside potential relative to revenue growth in the forecast.

⚠️ Recent read-throughs from Azure results and third-party retail data have dampened investor sentiment going into earnings.

📝 Q4 North America Retail Revenue is projected at $127.7 billion, up 10.5% year-over-year.

☁️ AWS revenue for Q4 is estimated at $34.6 billion, representing a 20% increase year-over-year.

📊 Total operating margin for Q4 is modeled at 11.9%, slightly beating the Street's expectation of 11.7%.

🚀 Investment focus will shift to updated guidance on capacity expansion and capital allocation in future quarters.

Bullish Signals
  • Evercore ISI analyst Mark Mahaney reiterated an Outperform rating on Amazon with a $335.00 price target.
  • Analysts forecast a potential script flip for AMZN from AI laggard to AI winner by 2026, similar to the trajectory seen in GOOGL '25.
  • Consensus estimates show Q4 revenue of $211 billion (up 12% year-over-year) and operating income of $$24.6 billion with an 11.7% margin.
  • The firm models AWS Revenue growth at 20% year-over-year to reach $34.6 billion in Q4.
  • North America Retail Revenue is projected to grow 10.5% year-over-year, reaching $127.7 billion.
  • Evercore ISI forecasts a total operating margin of 11.9% for Q4, which exceeds the Street's expectation of 11.7%.
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Risk Factors
  • Analysts acknowledge Amazon currently faces narrative risks as it is characterized as an 'AI laggard' compared to competitors like GOOGL.
  • Retail-specific sales indicators appear softer despite general supportive retail spending trends, creating a divergence in performance signals.
  • Evercore ISI models capital expenditure at $125.17B for FY25, which is significantly higher (+61% year-over-year) than Street expectations and exceeds their FCF margin model.
  • The analyst firm explicitly states that while AMZN has potential, other AI stocks offer greater upside potential while carrying less downside risk.
  • Investors will be closely scrutinized for durability of advertising growth and updates on capital spending, indicating uncertainty around these key growth drivers.
Full Analysis
Analyst Mark Mahaney of Evercore ISI has reiterated an Outperform rating on Amazon.com, Inc. (NASDAQ:AMZN) with a price target of $335.00, suggesting the company could transform from an AI laggard to an AI winner by 2026. The firm anticipates Q4 earnings reporting on February 5 will meet market expectations, forecasting revenue of $211 billion (a 12% year-over-year increase) and operating income of $24.6 billion, which reflects an 11.7% margin. Evercore views these figures as reasonable given the intra-quarter data trends and recent read-throughs that have dampened sentiment following results from Azure and third-party retail data. The core narrative driving this bullish outlook is the potential acceleration in revenue growth and expansion of operating margins, modeled to be slightly better than consensus estimates with an 11.9% total operating margin for Q4. Evercore expects North America Retail Revenue to reach $127.7 billion (up 10.5%) and AWS Revenue to hit $34.6 billion (up 20%), supported by the company's status as the firm's number one Large Cap Net Long. Analysts are closely watching for continued AWS growth acceleration, sustainability of retail unit economics, durability in advertising revenue, and updated guidance on capital spending specifically regarding capacity expansion. For the first quarter of 2026, consensus estimates are viewed as achievable, with greater upside potential for operating income relative to revenue compared to previous quarters. Evercore models Free Cash Flow for fiscal year 2025 at $31.6 billion, implying a 4.4% FCF margin, and capital expenditures of approximately $125.17 billion, representing a significant 61% year-over-year increase which is slightly higher than the street's expectations. The firm acknowledges the potential of AMZN but notes that certain other AI stocks currently offer greater upside potential with less downside risk, suggesting investors should consider undervalued opportunities that could benefit from onshoring trends and tariffs in their portfolios.