Amazon.com Inc. Maintains Growth Momentum with Custom Silicon Advantage, Target Price US$280 May 13, 2026

Amazon.com Inc. continues to demonstrate strong operational performance, driven primarily by accelerating growth in its cloud computing division and emerging advantages in custom silicon technology. The company operates as a diversified technology conglomerate, with core businesses spanning cloud services through Amazon Web Services (AWS), e-commerce retail operations, and digital advertising platforms.

Strong AWS Performance Drives Revenue Growth

Amazon’s first quarter 2026 results showed revenue performance in line with expectations, representing 23% of full-year forecasts. The standout performer was AWS, which delivered exceptional growth of 28% year-over-year, marking the fastest expansion in 15 quarters. This acceleration reflects robust demand for both traditional cloud migration services and expanding artificial intelligence workloads, including model training, inference, and agentic applications.

The company’s Bedrock platform has gained significant traction, with customer spend growing 170% quarter-over-quarter, demonstrating strong market adoption. AWS maintains substantial demand visibility with a backlog of US$364 billion, representing 93% year-over-year growth excluding the Anthropic deal. Management has reaffirmed its commitment to continued heavy capital expenditure investment, expressing high confidence in monetisation given that substantial capacity is already secured by customer commitments.

Custom Silicon Emerges as Competitive Differentiator

Amazon’s in-house chip business has become a significant structural advantage, with growth of 40% quarter-over-quarter positioning it among the top three data centre chip businesses globally. The company’s Trainium chips deliver 30-40% superior price performance compared to alternatives and are already largely sold out across current and next-generation capacity, with strong multi-year commitments from major AI laboratories.

Management highlighted that custom silicon could generate tens of billions in annual capital expenditure savings whilst providing several hundred basis points of margin advantage. This vertical integration strengthens AWS’s cost structure and pricing power, particularly as AI workloads continue scaling.

Retail Operations Show Improved Efficiency

The retail division continues demonstrating operational leverage, with unit growth of 15% year-over-year outpacing cost increases in outbound shipping (12% growth) and fulfilment expenses (9% growth). Perishable sales have scaled dramatically, growing over 40 times year-over-year, establishing Amazon as the second-largest grocer in the United States. Customers order nearly three times more items and spend over 80% more, reinforcing larger basket sizes and supporting both customer experience and operating leverage.

Investment Recommendation

Phillip Securities Research has downgraded its recommendation from BUY to ACCUMULATE due to recent stock price movements, whilst maintaining an unchanged target price of US$280. The firm believes Amazon is well-positioned in artificial intelligence, leveraging full-stack capabilities including custom chips, strategic partnerships with OpenAI and Anthropic, and unique datasets to drive ecosystem stickiness and capture long-term growth opportunities.

Frequently Asked Questions

Q: What was Amazon's AWS growth rate and why is it significant?

A: AWS grew 28% year-over-year, representing the fastest growth in 15 quarters. This acceleration is driven by both core cloud migration and expanding AI workloads, including model training, inference, and agentic applications.

Q: How is Amazon's custom silicon business performing?

A: Amazon's in-house chip business grew 40% quarter-over-quarter, positioning it among the top 3 data centre chip businesses globally. Trainium chips offer 30-40% better price performance than alternatives and are largely sold out with strong multi-year commitments.

Q: What cost advantages does Amazon's custom silicon provide?

A: Management highlighted that custom silicon could save tens of billions in capital expenditure annually and provide several hundred basis points of margin advantage, strengthening AWS's cost structure and pricing power.

Q: How is Amazon's retail business performing operationally?

A: The retail division shows improved efficiency with unit growth of 15% year-over-year outpacing cost growth in shipping (12%) and fulfilment (9%). Perishable sales have scaled over 40 times year-over-year.

Q: What is Phillip Securities Research's current recommendation?

A: The firm downgraded from BUY to ACCUMULATE due to recent stock price movement, whilst maintaining an unchanged target price of US$280.

Q: How significant is Amazon's grocery business?

A: Amazon is now the #2 grocer in the U.S., with customers including groceries ordering nearly 3 times more items and spending over 80% more, supporting larger basket sizes.

Q: What is AWS's current backlog and growth trajectory?

A: AWS maintains a backlog of US$364 billion, representing 93% year-over-year growth excluding the Anthropic deal, providing substantial demand visibility for sustained growth momentum.

Amazon.com Inc. Maintains Growth Momentum with Custom Silicon Advantage, Target Price US$280

This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.

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