Amazon's OpenAI deal will drive AI revenue growth, stock upside, Citi says

Amazon has room to run as it ramps up its compute capacity and deepens its ties with OpenAI, even as investors fret over eye-watering artificial intelligence investments, according to Citi Research. The bank raised its price target on Amazon to $285 per share from $265, implying about 27% upside from Tuesday’s close. It also reiterated its buy rating for the stock. “We are raising our AWS projections given continued AI demand and our analysis of revenue contributions from Anthropic, OpenAI, and core (non-AI) workloads,” analyst Ronald Josey said Wednesday in a note to clients. In late February, Amazon unveiled a strategic partnership with OpenAI that included a pledge to invest up to $50 billion in AI, deepening the connection between the Silicon Valley power player and the owner of ChatGPT. The deal makes Amazon Web Services the exclusive third-party cloud distributor for OpenAI Frontier, an enterprise platform for building, deploying and managing AI agents. The agreement marks one of several multibillion-dollar deals struck over the past few months, as Meta , Oracle , Google , Microsoft , OpenAI and other big names double down on commitments to invest in AI infrastructure. Citi expects AWS revenue growth will rise 28% year-over-year in the first quarter of 2026, and grow 29% in 2026, before accelerating to 37% year-over-year growth in 2027 due to the Anthropic and OpenAi ramp up. AI revenue will likely account for roughly 58% of AWS’ estimated incremental revenue in 2026, and could make up 72% of expected revenue in 2027, according to Citi. “We believe AWS can ramp its infrastructure capacity given demand,” Josey wrote. “While we acknowledge the concerns around AWS [return on investment], competition, and limited [free cash flow] visibility, given monetization quickly following capacity additions, accelerating revenue growth, and rising [operating income], we believe AWS is increasingly well positioned.” AWS is on track to double its compute capacity by 2027, potentially reaching about 24 gigawatts of compute, the analyst said. Citi’s call falls largely in line with consensus on the Street. Of the 69 analysts covering Amazon, 65 have a buy or strong buy on shares. Howver, its price target is lower than the consensus target. Amazon shares have declined 10% since the beginning of the year as investors’ concerns over the size of investments in AI infrastructure buildouts continue to swirl.