Amazon (AMZN) shares closed Wednesday's session up 2.18% at $255.36, following the announcement of an expanded partnership with AI startup Anthropic. The deal, which includes a significant financial commitment from both sides, has sharpened investor focus on the company's upcoming first-quarter earnings report, scheduled for April 29.
Under the terms of the agreement, Anthropic has committed to spending over $100 billion on Amazon Web Services (AWS) over the next decade. Amazon, in turn, will invest $5 billion upfront in Anthropic, with the potential to add another $20 billion contingent on the achievement of specific commercial milestones. This brings Amazon's total potential investment in the AI company to $25 billion, signaling a deepening of their strategic relationship.
The partnership is seen as a major win for AWS, which has been under pressure to demonstrate that its massive capital expenditures—projected at roughly $200 billion for 2026—are translating into accelerated revenue growth. Analysts were quick to react, with several raising their price targets on Amazon stock. Truist reiterated its Buy rating and $285 target, citing the Anthropic deal as evidence of AWS strengthening its ties with a key client and highlighting the growing momentum of Amazon's custom Trainium AI chips. Bank of America raised its target to $298, and KeyBanc increased its target to $325, both expressing confidence in AWS's growth trajectory.
Amazon's Q1 earnings release on April 29 will be a crucial test. In February, the company forecast revenue between $173.5 billion and $178.5 billion, with operating income ranging from $16.5 billion to $21.5 billion. Analysts are currently expecting earnings per share of $1.63 for the quarter, according to Reuters data. The results will be closely scrutinized for signs that the Anthropic deal and other AI investments are beginning to pay off.
However, the competitive landscape remains intense. In the most recent quarter, AWS reported 24% revenue growth, but this lagged behind Google Cloud's 48% jump and Microsoft Azure's 39% advance. While AWS maintains its position as the largest cloud provider, questions persist about whether its AI spending can do more than simply defend its market share. The company's planned $200 billion in capital spending for 2026—up from $131 billion in 2025—has raised concerns about potential negative free cash flow by that year, as investment outlays may exceed operating cash flow.
Adding to the complexity, rising oil prices are introducing new headwinds. Brent crude has surged past $100 per barrel amid ongoing geopolitical tensions involving Iran and disruptions in the Strait of Hormuz. These factors could impact Amazon's shipping and delivery costs, potentially weighing on its forward guidance. Analysts have pointed to lingering anxiety over possible AI "overinvestment" and the risk of softer returns ahead.
Despite these challenges, Wall Street sentiment remains largely bullish. Of the 70 analysts tracked by Reuters, the majority rate the stock as Outperform. The market is now looking to Amazon's earnings report as a pivotal moment to assess whether its blockbuster AI deal can indeed accelerate cloud growth, improve margins, and sustain cash flow.
