Munster Says Amazon's Two-Year AWS Guidance Signals Bigger AI Opportunity

what happened

According to Stocktwits, Gene Munster of Deepwater Asset Management wrote in a Friday note that Amazon has given investors a far clearer view of its AWS cloud business than usual. Management broke its usual practice of guiding for a single quarter and instead outlined expectations for two full years. It said AWS should grow at least 40% in both 2027 and 2028, and that the unit could eventually reach $1 trillion in annual revenue.

Munster noted that AWS grew 39% in the September quarter, in line with forecasts. He argued the bigger message is the length and scale of the outlook, which he sees as a sign of confidence in AI-related demand. He also pointed to plans to start selling Amazon's custom Trainium AI chips toward the end of 2027, though he does not expect chip sales to become a major revenue source.

Munster estimates AWS currently accounts for about 21% of Amazon's revenue and could approach half within five years. He said reaching that scale would require heavy investment, and he expects capital spending to rise faster than current Wall Street estimates.

why it matters

The note matters because the market has increasingly valued Amazon through its AI infrastructure and cloud business. Longer guidance reduces uncertainty, but it also points to rising spending on data centers and chips, which could weigh on margins and free cash flow over time.

market impact

Amazon (AMZN): long-range AWS guidance supports interest in the stock, while rising capex weighs on future free cash flow

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