11:46 AM EDT, 07/31/2026 (MT Newswires) -- Amazon.com's ( AMZN ) Amazon Web Services momentum is accelerating, with strong demand for artificial intelligence and backlog growth supporting expectations for growth above 40% next year, UBS said in a note Friday.

The analysts said the company disclosed $25 billion in AI annual recurring revenue and $496 billion in backlog, with backlog increasing by $51 billion quarter-over-quarter following the previously announced Anthropic agreement.

This supports expectations for approximately 39% year-over-year AWS growth in H2 and above 40% growth next year as OpenAI begins using Trainium chips in early 2027, the analysts added.

Despite investor concerns that a higher mix of AI workloads could pressure margins, AWS operating margins remained stable at 38% quarter-over-quarter after adjusting for a $600 million energy cost benefit, the analysts said.

They added that they believe AWS can continue expanding margins into 2027 as revenue growth outpaces expense growth, and expect Street estimates for revenue and operating profit to move higher.

UBS increased its price target on Amazon.com ( AMZN ) to $318 from $305 and reiterated its buy rating.

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