Amazon Web Services could “very possibly” become a business that does $1 trillion in annual revenue, Amazon.com CEO Andy Jassy said recently. That’s a bold prediction for a unit that’s currently taking in about $170 billion in annualized sales.
Hitting that goal doesn’t seem to be in Amazon’s future in the near term, analysts say. But as the company looks to grow its cloud business at massive scale, it could deliver major returns for investors, according to Morgan Stanley’s Brian Nowak.
He outlined in a recent note that there’s a path for AWS to reach $1 trillion in revenue in the next eight to 10 years, while earnings before interest and taxes for the overall company could hit $500 billion in the same period. That sort of model would imply a $500 share price by the end of 2027, roughly double the current share price of $258.68.
As demand for artificial intelligence remains insatiable, the key for AWS is how quickly it can add computing capacity.
He estimates that the company will bring on 6 gigawatts in 2026 and 8 gigawatts in 2027, and makes the assumption that AWS would continue to add an incremental 8 gigawatts per year following that — what he calls a “reasonable range,” even though that’s a farther-out time period to forecast.
Amazon has not revealed exact figures for current capacity. Jassy said on the earnings call for the company’s last September quarter that the company had added 3.8 gigawatts of data-center capacity in the previous 12 months. On the most recent earnings call, Jassy reiterated that the company is on pace to double its power capacity by the end of 2027, relative to 2025 levels.
Moving beyond capacity assumptions, Nowak believes the “swing factor” determining the company’s growth will come down to how the company can monetize each watt of compute.
Each incremental watt is worth $8 to Amazon currently, according to Nowak. But if AWS monetizes its business at $12 per watt, that would yield $1 trillion in revenue as early as 2035. He believes that innovation will drive up the pace at which cloud companies broadly can cash in on each watt.
But hitting the $1 trillion goal is far from a slam dunk. For one, Nowak’s calculations run on the assumption that demand for computing capacity will continue to grow.
“As long as innovation and demand for [generative AI] tools continue to scale, we still believe each hyperscaler’s ability to bring on compute capacity is the key factor driving forward revenue growth,” he wrote.
Beyond 2028, Amazon’s ability to add capacity will depend on a number of unknowns, such as purchase volumes of servers and racks, power efficiency, regulatory barriers and constraints on the speed at which data centers can be built.
Any estimate as large as $1 trillion is “bold speculation,” D.A. Davidson analyst Gil Luria told MarketWatch.
He said it’s reasonable to expect AWS to grow at a healthy rate of 40% to 50% this year, but that “extrapolating beyond that is more than ambitious.”
“There is no hard information Mr. Jassy or anybody else has to quantify a market that didn’t even exist three years ago,” Luria said.