Amazon’s Power Play: How AWS and Ads Are Fueling the Next Big Leg of Growth
Stifel’s latest research suggests Amazon’s cloud and advertising engines are revving back to full speed, with new silicon, smarter AI tools and rural logistics all part of the story.
When Amazon reported a 20% jump in cloud revenue this quarter, its fastest since 2022, investors took notice. The company’s Amazon Web Services division did not just beat expectations; it outpaced Microsoft’s Azure and Google Cloud’s growth for the first time in more than a year. In a market obsessed with AI infrastructure, that is no small feat.
The headline from Stifel’s October 2025 report is simple: momentum is back. The bank has lifted its price target for Amazon shares to $295, implying room for further gains from a late-October close of $222. Its analysts cite accelerating AWS growth, surging advertising revenue and “healthy margins with more to go.”
Cloud resurgence and silicon ambition
AWS revenue hit $33 billion in the third quarter, up 20% year on year, helped by strong demand for AI workloads and the rapid rollout of Amazon’s custom Trainium 2 chips. Stifel calls Trainium a “multi-billion-dollar business” that grew 150% quarter on quarter, underpinning Amazon’s push to control its own AI computing stack.
Project Rainier, a new data centre cluster already running half a million Trainium 2 chips, is now powering models from Anthropic’s Claude family. This marks a showcase of Amazon’s integrated hardware and software strategy. With ten more cloud regions planned, AWS’s footprint and backlog, now at $200 billion, show a clear intent to widen the gap.
Advertising: the quiet profit engine
If AWS is Amazon’s muscle, advertising is its margin. The segment delivered $17.7 billion in revenue, up 23.5%, comfortably beating forecasts. The company’s AI-driven shopping assistant Rufus, used by 250 million customers this year, is reportedly on track to generate more than $10 billion in incremental annualised sales. Meanwhile, over 1.3 million independent sellers have adopted Amazon’s generative AI tools to optimise listings and content.
That combination of scale and automation is turning Amazon’s ad business into a self-reinforcing flywheel: more sellers, better recommendations and higher-margin ad inventory. For investors, it is the part of Amazon that behaves most like Google.
Spending to save time
Capital expenditure will rise roughly 51% this year to $125 billion as Amazon doubles down on cloud capacity and logistics upgrades. Power constraints are a growing issue, but Stifel sees the investment as justified. Delivery times have shortened for a third consecutive year, with same- and next-day coverage expanding by 60% in rural America.
In short, Amazon is still spending heavily, but doing so in businesses where each new data centre or delivery hub feeds directly into margin-rich growth.
The view from Stifel
Stifel’s analysts are sticking with a Buy rating. Their revised forecasts put 2025 revenue at $713.6 billion and EBITDA at $171.1 billion, rising to $207.7 billion in 2026. The firm values Amazon at 16.5 times forward EBITDA, a multiple that assumes cloud and ad momentum will continue to offset softer retail margins.
Competition from Microsoft and Google remains fierce, and Amazon’s $2.5 billion legal settlement with the US Federal Trade Commission did dent quarterly profit margins. But the report suggests these are manageable headwinds in an otherwise accelerating story.
The bigger picture
Two decades after AWS redefined computing, Amazon is once again betting that control of the stack, from chips to software to services, will secure its next decade of dominance. The numbers hint that the gamble is working.
Or, as Stifel puts it, “AWS acceleration, ads outperformance and healthy margins with more to go.”
