Wells Fargo is bullish on Amazon, and the Rainier project is expected to boost cloud revenue
Wells Fargo upgraded Amazon's rating from "Hold" to "Outperform," expecting the Rainier project to boost AWS cloud business revenue. The project is expected to be operational by January 2026 and could bring approximately $14 billion in annual revenue to AWS when fully operational. Wells Fargo raised its 2026 AWS revenue forecast by 3% and its 2027 forecast by 7%. Although the Rainier project may put pressure on profit margins, the leverage of fixed costs will offset this impact
According to the Zhitong Finance APP, Wells Fargo has upgraded Amazon (AMZN.US) from "Hold" to "Outperform." The bank stated that, given the increased capacity of the Rainier project and the market share loss expected in 2025, it is more confident in the accelerated growth of Amazon Web Services (AWS) revenue in 2026.
Wells Fargo analyst Ken Gawrelski noted that the Rainier project is an AWS data center located in Indiana, specifically designed for Anthropic computing, which is expected to be operational by January 2026. Gawrelski's team estimates that the facility, when operating at full capacity (2.2GW), will generate approximately $14 billion in annual revenue for AWS. Wells Fargo has raised its revenue forecast for AWS in 2026 by 3% and for 2027 by 7%. Notably, Wells Fargo currently predicts that AWS revenue will grow by 22% year-on-year in 2026, while the market generally expects an 18% year-on-year growth.
Gawrelski does expect the Rainier project to put pressure on profit margins.
Regarding AWS profit margins, Gawrelski anticipates that the Rainier project will have a moderate impact of about 50 basis points on the profit margin in 2026. However, Gawrelski has raised the revenue forecast because the leverage of fixed costs will offset this adverse effect. Nevertheless, Gawrelski still expects that profit margins in 2027 will face pressure year-on-year, while the market generally expects margins to stabilize at the 2026 level (34.3%).
As of Wednesday's market close, Amazon shares fell 0.23% to $220.21, remaining roughly flat since the beginning of the year
