According to the Oppenheimer report, Amazon's continuously expanding cloud infrastructure capacity is an overlooked growth engine, with each additional gigawatt of capacity expected to generate approximately USD 3 billion in revenue.
$Amazon (AMZN.US)$ The stock's performance this year has lagged behind most of its tech giant peers, but an increase in cloud business capacity could drive its recovery.
Oppenheimer estimates that for every additional gigawatt of capacity, Amazon generates approximately $3 billion in revenue.
Amazon has not benefited from the same level of AI-driven enthusiasm as its 'Magnificent Seven' tech peers in the U.S. market this year, with investors questioning whether its cloud computing business can expand its market share.
However, Oppenheimer analyst Jason Helfstein believes Wall Street is overlooking a golden opportunity.
Amazon has made progress this year in advancing its Amazon Web Services (AWS) business, which is widely regarded as the stock's primary growth driver. Last month, the company launched its data center project 'Rainier,' reporting that AWS revenue growth reaccelerated to 20% in the third quarter.
As Amazon continues to add new cloud computing capacity, Helfstein stated that the stock is poised for a rebound. In a report released on Sunday, he reiterated his 'Outperform' rating and raised the target price from $290 to $305.
Amazon’s stock has risen 6.7% in 2025, making it the second-worst performer among the 'Magnificent Seven' mega-cap tech stocks year-to-date, slightly outpacing Tesla (TSLA.O).
Capacity constraints have been a 'material headwind' for AWS’s re-acceleration over the past few quarters, but Helfstein noted that Amazon plans to double its capacity by 2027 and add at least one gigawatt of capacity in the fourth quarter.
In today’s supply-constrained environment, new capacity is expected to be immediately snapped up and directly translate into sales. According to Oppenheimer’s calculations, every additional gigawatt of capacity could generate approximately USD 3 billion in revenue. In an optimistic scenario, Amazon could potentially add 5 gigawatts of capacity annually over the next two years.
Helfstein wrote that as Amazon brings more capacity online, AWS revenue could grow by 36% year-over-year to reach USD 175 billion by the end of 2026. This estimate is significantly higher than the FactSet analysts’ consensus forecast of USD 154 billion.
Wall Street estimates imply a decline in AWS revenue per gigawatt, with capital expenditures remaining elevated relative to revenue. However, Helfstein believes pricing will show greater resilience as capacity utilization improves, and Amazon’s ROI on AI-related capital expenditures should also improve going forward.
AWS’s capital expenditure as a percentage of revenue has risen from 41% in 2024 to an estimated 77% in 2025, but Helfstein expects this ratio to trend toward 56% by 2027, 'essentially reverting to historical norms.'
Helfstein pointed out that the AWS cloud computing conference, which opened on Monday, could serve as a near-term potential catalyst for the stock amid reinvestment opportunities.
He wrote: 'Any indication of increased capacity or improved chip efficiency could act as a catalyst.'
Editor/Liam
