Amazon Price Targets Trimmed After Q3 Miss as AWS Hits 39%

Lower targets, same bullish ratings

After Amazon's third-quarter report, Wall Street analysts were more positive than the stock market. Many lowered their price targets, but almost none changed a bullish rating. That pattern says more about where analysts disagree with investors than the target cuts do.

On October 30, 2026, a day after the results, several research firms cut their 12-month targets for Amazon and kept their ratings unchanged.26 Morgan Stanley cut its target from $350 to $335, kept its Overweight rating and kept Amazon as a top pick.6 Goldman Sachs trimmed its target from $375 to $370 and reiterated Buy.6 Scotiabank cut from $325 to $300 and kept Sector Outperform. Wedbush went from $310 to $298 and kept Outperform.2

Other firms made similar moves. TD Cowen lowered its target to $340 from $350, kept its Buy rating and called the post-earnings selloff "overdone."3 Bank of America went to $317 from $320 and kept Buy.5 Baird cut to $300 from $310 and recommended buying the pullback.5 KeyBanc moved to $345 from $350 and kept Overweight.9 Cantor Fitzgerald made one of the deepest cuts, from $310 to $280, but still rates the stock Overweight.10 Citizens made the largest cut in the group, to $275 from $315, after North America and International retail sales fell short of expectations. It kept a Market Outperform rating.95

Some firms raised their targets. UBS went to $352 from $348.5 Mizuho went to $335 from $330.5 BMO went to $390 from $380.7 MoffettNathanson raised its target from $315 to $357.5 Barclays and JPMorgan both kept Overweight ratings with $365 targets. Citi kept Buy at $350.87

The overall picture is still very bullish. One tally counts 43 Buy ratings, one Hold and no Sells, with an average target of $324.55. That implies about 35% upside from Friday's close of $240.35.1 Another aggregator puts the average target near $327 across 60 analysts.4

What the quarter actually showed

The quarter was a narrow miss on Wall Street's headline numbers. Underneath, operating results were strong.

Amazon earned $1.89 per diluted share, down from $1.95 a year earlier.14 Consensus estimates were quoted between $1.96 and $1.97, so the miss was about 3.5%.117 Revenue rose 12% to $201.9 billion from $180.2 billion, or 13% excluding currency effects.1718 That was a few hundred million dollars below forecasts, a shortfall of about 0.1%.177

The profit picture looks better on an operating basis. Operating income rose 61% to $28.1 billion. The 13.9% operating margin was the highest in Amazon's history.1312 Net income still slipped to $20.7 billion from $21.2 billion.14 The main reason is below the operating line: non-operating items were a $1.2 billion loss this quarter, compared with a $10.7 billion gain a year earlier.13 Coverage links last year's gain partly to investment gains that inflated the comparison.15 In short, the business made more money, while one-time accounting items made last year's profit look larger.

The retail segments grew modestly. North America revenue rose 6% to $112.9 billion with a 7.7% operating margin. International revenue was $43.1 billion, up 8% excluding currency effects.12 Management said the comparison was distorted by timing: Prime Day fell entirely in the third quarter in 2025. Adjusted for that, growth would have been about 4 percentage points higher.18

AWS carries the bull case

Analysts' optimism rests mainly on Amazon Web Services (AWS), the cloud unit, whose results beat expectations.

AWS revenue was $45.98 billion, up 39% from a year earlier. That beat the $45.29 billion StreetAccount consensus and was the segment's fastest growth since late 2021.11 Segment operating income rose 55% to $17.77 billion, also above consensus.11 AWS now brings in about 23% of Amazon's revenue, a record share.11 It generated roughly 63% of the company's operating income.14

Growth sped up from 36.7% in the second quarter, the sixth straight quarter of acceleration.167 AWS's revenue backlog, meaning contracted business not yet booked as revenue, reached $578 billion. Management said it is growing at triple-digit rates.12 Chief executive Andy Jassy said he expects AWS growth above 40% in both 2027 and 2028.17 Analysts cited that forecast repeatedly. UBS pointed to the outlook and the backlog as signs of reliable demand.7 KeyBanc said it sees a path to $1 trillion in AWS revenue over time.9

The AWS figures also help explain the gap between analysts and the market. Investors had wanted 40% growth, and 39% fell just short.7 Mizuho said AWS was a little softer than buyers had hoped because they expected sequential growth similar to the second quarter.5 Morgan Stanley's Brian Nowak called the growth figures disappointing against expectations. He also noted that the $3.8 billion quarter-over-quarter increase was the second-largest in AWS's history.7

Where the coverage diverges

Accounts of the quarter differ in a few places.

The first is whether revenue beat or missed. TD Cowen described revenue as a beat, with AWS strength outweighing a slight shortfall in advertising.3 KeyBanc called revenue "essentially in line."9 Earnings trackers recorded it as a miss of about $200 million to $280 million.117 The answer depends on which consensus figure each firm uses. With a gap this small, "in line" is the most accurate description.

The second is advertising, which drew less discussion than AWS. Ad revenue grew 12% to $19.6 billion.12 One account puts the expectation at $20.8 billion, a clearer miss than anything in the headline numbers.15 Bernstein called ad growth weak.8 Management expects ad growth to return to the high teens in the fourth quarter and pointed to timing issues.1814

The third is cash flow, the measure with the widest range of figures. One report cites negative free cash flow of $33.5 billion.12 Another puts trailing 12-month free cash flow at negative $42 billion, on $211 billion of capital spending and $168 billion of operating cash flow.20 The numbers differ, but both point the same way. Amazon is spending more on infrastructure than its operations bring in, and long-term debt has reportedly risen 164% this year to $173 billion.20

Why the targets came down

The firms that cut targets gave reasons that were mostly about valuation, not about the business getting worse.

Bank of America said it lowered its sum-of-the-parts target (a valuation that adds up separate values for each business) because valuations across AI stocks have fallen. It still praised Amazon's AI position, custom chips and backlog growth.5 KeyBanc said its own cut was about valuation.9 Barclays raised a broader concern: the long-term economics of AI are still uncertain, including how much spending will be needed and how it will be financed.8

Our reading is that the cuts mostly reflect two things. One is lower market valuations for AI stocks. The other is Amazon's spending plan. The company expects about $220 billion in cash capital expenditures for 2026.14 Third-quarter purchases of property and equipment more than doubled to $77.3 billion.14 The selling was also not limited to Amazon. Disappointing results from Alphabet and wider worries about AI spending weighed on tech stocks generally.15

Few analysts are questioning Amazon's ability to grow or earn profits. Citi expects AWS margins to stay in the mid-to-high 30% range.7 Morgan Stanley pointed to planned sales of Amazon's Trainium chips to outside customers as a new source of profitable growth.6 The question analysts and investors disagree on is when all that spending turns into free cash flow.

What to watch

The stock has clearly underperformed. Shares fell 3.15% in the five trading days after the report and 15.38% over three months.1 They traded down as much as 11% after hours on results day before partly recovering.128

Amazon's fourth-quarter guidance is net sales of $240 billion to $247 billion.9 It expects operating income of $28.5 billion to $33.5 billion.14 For investors, the next checkpoints are whether AWS growth passes 40% and whether ad growth reaches the high teens as promised. A third is whether the 2026 capital spending of about $220 billion turns into faster growth and stops looking like a drain on cash.

If AWS does cross 40%, analysts' current targets would look reasonable. If it stalls while spending keeps rising, analysts will probably have to cut further.