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Amazon.com Inc. NASDAQ: AMZN has given its shareholders little to cheer this year.

Despite the tech giant printing record revenues, the stock has managed a gain of barely 10% so far in 2026 and sits roughly where it stood 12 months ago. It’s safe to say investors have been feeling a bit hard done by and are due for some good news.

Earlier this week, it arrived—or at least appeared to. On Monday, Oct. 19, Morgan Stanley named Amazon its Top Pick, laying out a path in which Amazon Web Services (AWS) grows to $1 trillion in revenue—a scenario that, if it materializes, could more than double Amazon’s current share price.

Dodgy Timing

Unfortunately, the timing proved awkward. While the stock initially popped on the news, it had given back nearly all those gains by the close of trading on Thursday, Oct. 22. It seems Amazon, like most of its tech peers, has been swept up in a broad market pullback over higher oil prices and fresh jitters about AI spending. For context, the stock is back trading around $250, about 12% below the record high it set in July.

There’s some interesting tension at play here. Bulls like Morgan Stanley clearly see massive long-term potential, while the market is clearly nervous about the stock’s near-term trajectory. With earnings due next week on Oct. 29, the question is whether to buy into the latter’s optimism before the report or wait for proof.

The Bull Case Behind the Update

Morgan Stanley’s call rests on a simple idea: that Amazon’s most profitable engines are all firing at once. In his update, analyst Brian Nowak argued the cloud unit is becoming a rare “Rule of 90” business, where growth and margins combine for exceptional returns. Alongside the reiterated Overweight rating, Nowak raised his near-term price target to $350, pointing to about 40% upside from the current share price.

The upside potential looks real, not just hoped-for. AWS reportedly has a cloud backlog of nearly $500 billion, suggesting the constraint is how fast it can build capacity, not whether customers will show up. Morgan Stanley’s bull case isn’t just about cloud, either. Nowak noted that Amazon’s high-margin advertising keeps growing, Prime membership is deepening customer loyalty, and a fast-expanding fleet of warehouse robots is set to squeeze billions in annual savings out of fulfillment. Add it up, and it’s easy to see why so many other analysts have also been raising their price targets.

Why the Stock Won’t Cooperate

So why aren’t the shares trending up? Part of the answer is the background music. A jump in oil prices has driven the latest pullback, while the broader caution reflects mounting worries about the sheer sums the AI hyperscalers, Amazon chief among them, are pouring into their data centers.

Amazon is on track to spend around $220 billion this year, a bill so large it has pushed the company’s free cash flow into the red. Investors are essentially being asked to fund an enormous build-out now on the promise of profits later, and after a year of the stock going almost nowhere, their patience is clearly wearing thin.

What the Report Has to Show

This all makes Amazon’s Oct. 29 earnings an important test, and the headline figure will matter far less than the details beneath it. Investors will watch closely to see whether AWS growth beats the already-high bar, whether that giant backlog is still expanding, and whether Amazon’s cloud margins are holding up despite the high costs of all those new data centers.

Just as important will be the spending plans. The market will want to see Amazon hold the line on future capital spending and provide some sign that free cash flow can recover, rather than signaling that the cash drain will keep running for years to come. Reassurance there would likely do more for the stock than any single beat on earnings or revenue.

Buy Now? Or Wait?

So is there a case for stepping in before the report? Yes, and a reasonable one at that. The long-term story is compelling: AWS looks to be reaccelerating, its vast backlog all but locks in years of growth, and Amazon’s other businesses are serious profit machines in their own right. Wall Street’s growing enthusiasm, capped by Morgan Stanley’s Top Pick call, isn’t built on thin air.

But the recent price action is hard to ignore. The jitters now swirling around the broader AI trade have raised the bar for Amazon’s report, and with so much suddenly in question across the sector, anything less than a convincing quarter could sting. For investors who believe in the AI build-out, the smarter stance into next week’s report may be cautious optimism: bullish on where Amazon is heading, but alert to just how bumpy the road to get there could be.

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