Amazon’s Post-Q2 Earnings Rally Has Faded But Don’t Give Up on AMZN Stock Just Yet

The earnings season for Magnificent 7 stocks for the current reporting season is over after Nvidia (NVDA) reported its fiscal Q2 2027 earnings on Aug. 26. While the earnings season began on a sour note after Tesla (TSLA) plunged following its Q2 confessional, it ended on a buoyant note with Nvidia rising 8.7% and adding over $400 billion to its market cap.

Microsoft (MSFT) and Amazon (AMZN) were the only Mag 7 names to see double-digit gains after their June quarter earnings. However, while Microsoft has continued to rip higher and now trades above $500, Amazon has pared some of the post-earnings gains. Let's examine why AMZN has looked weak in recent weeks and analyze the stock's forecast.

Why Has Amazon's Stock Weakened?

To begin, I found AMZN’s sharp rally after Q2 earnings to be a bit of an overreaction. While the report was encouraging, particularly the 37% year-over-year (YoY) revenue growth that Amazon Web Services (AWS) delivered, the report wasn’t as stellar as Microsoft's. Amazon’s Q3 guidance also trailed estimates, and the company raised its 2026 capex budget by 10% to $220 billion.

On a similar note, Amazon recently said that it would add another 2 million Nvidia GPUs between 2027 and 2028. While that would be music to the ears of Nvidia investors, it also implies that Amazon’s burgeoning capex—already the highest among all tech companies—is not coming down anytime soon. Tech companies, including Amazon, are posting negative free cash flows and are raising capital to build the war chest for AI infrastructure buildout even as investors are increasingly wary of the spending spree.

There are also lingering concerns over Amazon’s U.S. e-commerce business after Walmart (WMT) spooked markets with its recent quarterly earnings. It was not a one-off, and retailers across the board have been cautioning about consumer spending, particularly among low- and middle-income households as higher gas prices start pinching monthly budgets.

AMZN Stock Forecast

After Amazon’s Q2 earnings, several brokerages raised the stock’s target price. Looking at some of the significant hikes, Raymond James raised its target price from $280 to $390, while Goldman Sachs raised its target price from $335 to $375. Last week, Rosenblatt Securities initiated coverage on Amazon with a “Buy” rating and a target price of $335. 

The overall analyst sentiment remains bullish, and AMZN stock has a “Strong Buy” consensus rating from the 57 analysts tracked by Barchart. Forty-nine give it a “Strong Buy” rating, six rate it as a “Moderate Buy” while two rate it as a “Hold.” AMZN is the highest-rated Mag 7 stock, while TSLA ranks lowest with a consensus rating of “Moderate Buy.” AMZN stock has a mean target price of $326.49, which is 23% higher than current levels.

The Bull Case for Amazon

While concerns over AI capex and retail spending slowdown in the U.S. are for real, I believe investors should stay put in Amazon. The company has built an enviable ecosystem, which would only get better with AI. Notably, not only has AI helped put AWS’s growth on a higher pedestal, but the company is also using the technology to improve customer experience on its e-commerce platform. It is also using AI in logistics while helping advertisers make their ads more engaging and, in the process, more effective.

Prime is another key part of Amazon’s flywheel, as it not only brings in subscription and ad revenues, but these customers also tend to order more frequently on its e-commerce platform. The company has still just about scratched the surface in initiatives like grocery, pharmacy, and business-to-business (B2B), as well as the low-cost platform Haul, which would help it take on the likes of Temu and Shein.

AMZN stock trades at a forward price-to-earnings (P/E) of 35.5x, which is not exuberant for a company whose earnings are expected to rise 32% next year. Concerns about tech companies overinvesting in AI are not unfounded, nor are the circular deals in which they are investing downstream in their customers (cloud in Amazon’s case). However, I believe Amazon’s risk-reward is reasonably attractive here, and I see the recent weakness as an opportunity to add shares.