Amazon heads into Q2 earnings with BofA raising estimates to $198.8B

Bank of America raised its Amazon Q2 revenue estimate to $198.8 billion, above consensus of $196.8 billion, citing faster AWS acceleration.

"AWS is reaccelerating faster than the Street is modeling, driven by AI workloads and a $364 billion remaining performance obligation backlog," Justin Post, analyst at Bank of America, said.

BofA also lifted its operating profit estimate to $24.1 billion, compared with the $23.6 billion consensus. Amazon's AWS unit grew 28% in Q1 to $37.6 billion, its fastest expansion in 15 quarters. The cloud business carries a backlog of roughly $364 billion, with CEO Andy Jassy citing AI infrastructure commitments from OpenAI, Anthropic and Meta as underpinning further acceleration.

The July 30 report will test whether Amazon can sustain its AWS momentum while managing roughly $200 billion in planned 2026 AI capital expenditure. Shares trade at a forward P/E of 29, below Apple's 33 and a fraction of Tesla's 179, according to Jefferies, which named Amazon its top Magnificent 7 pick into earnings.

Jefferies reiterated Amazon as its top Magnificent 7 pick, citing a forward P/E of 29 versus Tesla's 179 and 75% quarterly earnings growth. The firm highlighted an AWS Q2 growth forecast of 32% and Prime Day survey data showing 54% of members increased spending by more than 10% year over year.

Amazon's Q1 results set a high bar. Revenue of $181.52 billion grew 16.6% year over year, while EPS of $2.78 beat the $1.73 consensus estimate by 61%. Net income included a $16.8 billion pre-tax gain from its Anthropic investment.

The company's custom silicon strategy adds another layer. Trainium and Graviton chips now run at over $20 billion annually, with $225 billion in Trainium revenue commitments including OpenAI and a $100 billion-plus Anthropic deal. Jassy said Trainium will "save us tens of billions of dollars of CapEx each year and provide several hundred basis points of operating margin advantage."

Wedgewood Partners, which holds Amazon as a top position, said in its Q2 investor letter that the company's aggressive free cash flow reinvestment is rational. "The depressed valuation presents an excellent long-term investment opportunity," the firm wrote, estimating Amazon's Anthropic stake alone is worth at least $100 billion.

The BofA upgrade adds to a bullish consensus. More than 60 analysts rate Amazon a buy, and 24/7 Wall St. set a $321.66 price target implying 30% upside from the current $247.23.

The raised estimates signal Wall Street expects AI demand to keep driving AWS growth. Investors will watch the July 30 report for AWS margin trends and any update on the $200 billion capex plan.

This article is for informational purposes only and does not constitute investment advice.