Amazon.com. Inc (NASDAQ:AMZN) is showing strong momentum in its core retail business and significant underlying growth in its Amazon Web Services (AWS) cloud division, driven by accelerating demand for its artificial intelligence services.

A healthy retail division, accelerating AI demand within its cloud unit, and a rapidly expanding advertising business are positioning Amazon for continued growth and improved profitability.

Wedbush analyst Scott Devitt reaffirmed his Outperform rating on Amazon and raised the price forecast from $250 to $280, citing that the company is positioning itself for a potential breakout in 2026.

Also Read: Amazon’s Cloud Division Faces New AI Competition from Microsoft and Google

Amazon’s stock presents an attractive risk/reward opportunity ahead of its third-quarter earnings, Devitt noted. The analyst argued that despite recent negative sentiment surrounding AWS, the company’s long-term growth thesis remains firmly intact.

E-commerce and Retail Strength

He noted multiple powerful growth drivers for the company. Devitt pointed to a healthy core retail business, supported by consumer surveys that show strong spending sentiment. He also highlighted Amazon’s continued dominance over rivals.

The analyst also noted that strong results from Prime Day and the Prime Big Deal Days event signal continued momentum for the e-commerce segment.

While Temu, Shein, and TikTok Shop are still taking a share of U.S. retail, the analyst said Amazon remains relatively insulated among incumbent e-commerce platforms.

AWS and AI Acceleration

While acknowledging investor concerns about AWS’s growth relative to competitors, he remained optimistic.

Devitt argued that strong underlying demand is evident in the division’s accelerating backlog growth and increased capital expenditure guidance.

The analyst highlighted that AWS’s AI business is growing at a triple-digit rate and sees the strategic partnership with AI startup Anthropic as a significant contributor to revenue growth in 2025 and 2026.

High-Margin Business Mix

Furthermore, he identified the rapidly expanding, high-margin advertising business as a key pillar of growth.

Devitt also noted a clear path to sustainable company-wide margin improvement, driven by a structural mix-shift toward AWS and advertising, ongoing optimizations in the fulfillment network, and the increasing use of automation and robotics.

The analyst noted the potential for Amazon to beat operating income expectations, which is driven by its persistent strength across its core businesses.

Devitt projected third-quarter revenue of $179.37 billion (up from prior $177.84 billion) and EPS of $1.57 (up from prior $1.45).

Price Actions: Amazon shares were trading higher by 1.69% to $224.83 at last check Friday.

Read Next:

• Meta’s Clash With EU Deepens After New EU Accusations Over Digital Rules

Image by Shutterstock