Morgan Stanley Projects AWS Growth to Exceed 20% by 2026

AWS cloud infrastructure expansion and AI partnerships drive Morgan Stanley’s optimistic growth forecast for Amazon’s core business

Key Takeaways

• AWS growth acceleration to 20%+ in 2026 according to Morgan Stanley analysts, driven by capacity expansion meeting surging AI and cloud computing demand
• Amazon price target raised to $300-$350 per share representing 35-57% upside potential, with 2026/2027 EPS estimates increased by 9% and 6% respectively
• Anthropic partnership generates $1.28 billion in 2025 with projected revenue rising to $5.6 billion by 2027 as AI workloads accelerate across AWS infrastructure

Introduction

Amazon Web Services stands poised for dramatic growth acceleration as artificial intelligence demand transforms the cloud computing landscape. Morgan Stanley analysts project AWS could achieve growth exceeding 20 percent in 2026, marking a significant acceleration from current levels as capacity constraints ease and AI workloads surge.

The investment bank’s bullish outlook reflects confidence in AWS’s ability to capitalize on the generative AI boom while maintaining its dominant market position. This growth trajectory could serve as a primary driver for Amazon’s overall valuation in coming years.

Key Developments

Morgan Stanley’s analysis centers on AWS’s strategic positioning within the rapidly expanding AI infrastructure market. The firm raised Amazon’s 2026 and 2027 earnings estimates by 9 percent and 6 percent respectively, citing improved macroeconomic conditions and manageable tariff impacts.

AWS’s partnership with Anthropic represents a cornerstone of this growth strategy. Amazon’s $8 billion investment in the OpenAI competitor has already appreciated to $13.8 billion, demonstrating both financial returns and strategic value. The alliance positions AWS as the primary cloud provider for one of the leading AI companies.

Capacity expansion efforts address previous constraints that limited AWS’s ability to meet surging demand. The company increases capital expenditures to approximately $33 billion by 2025, with elevated spending continuing into 2026 to support data center construction and critical infrastructure components.

Market Impact

AWS maintains commanding market leadership with 30-41.5 percent of global cloud infrastructure market share, significantly ahead of Microsoft Azure’s 20 percent and Google Cloud’s 12-13 percent positions. However, competitive pressure intensifies as rivals demonstrate faster growth rates in recent quarters.

In the second quarter, AWS posted 17 percent year-over-year revenue growth while Microsoft Azure and Google Cloud achieved 39 percent and 32 percent growth respectively. This performance gap highlights the urgency behind AWS’s capacity expansion initiatives.

The global cloud infrastructure market approaches $400 billion in 2025, with year-over-year growth re-accelerating primarily due to AI-driven demand. AWS’s customer base expanded to 4.19 million businesses, with startups and small-to-medium businesses driving 28 percent year-over-year growth from 2023 to 2024.

Strategic Insights

AWS’s growth strategy focuses on capturing AI workload migration while defending its market leadership position. The Anthropic partnership exemplifies this approach, providing access to cutting-edge AI models while generating substantial revenue streams for AWS infrastructure services.

Competitive dynamics shift as Microsoft leverages productivity software integration with Azure services, while Google employs embedded AI capabilities to enhance its market position. AWS responds through aggressive infrastructure investment and strategic AI partnerships rather than software bundling strategies.

The democratization of cloud services emerges as a key trend, with 92 percent of AWS customers spending less than $1,000 monthly. This broad customer distribution reduces dependence on large enterprise clients while creating sustainable growth foundations across diverse market segments.

Expert Opinions and Data

Morgan Stanley’s top analyst Brian Nowak emphasizes improving macroeconomic conditions and manageable tariff situations as additional growth drivers. According to Investing.com, analysts indicate “AWS growth has the potential to accelerate to 20%+ in ’26” based on detailed capital expenditure analysis and data center expansion projections.

Chief Information Officer surveys reveal stronger demand for AWS services compared to competitors, suggesting potential market share gains over Microsoft Azure, Google Cloud, and Oracle. This customer preference indicates AWS’s competitive positioning remains robust despite recent growth rate disparities.

Revenue projections for the Anthropic partnership demonstrate substantial financial impact, with Morgan Stanley estimating $1.28 billion in 2025 revenue rising to nearly $3 billion in 2026 and $5.6 billion in 2027. These figures reflect accelerating AI workload adoption across AWS infrastructure.

Conclusion

AWS positions itself for significant growth acceleration through strategic AI partnerships and aggressive infrastructure investment. The combination of expanding capacity, strong customer demand, and improving competitive positioning supports Morgan Stanley’s bullish 2026 projections.

The Anthropic alliance serves as both a revenue driver and strategic differentiator, while broader market trends favor established cloud leaders with substantial AI infrastructure capabilities. AWS’s market leadership faces intensifying competition but benefits from deep customer relationships and comprehensive service offerings across the expanding cloud computing landscape.