Wells Fargo has upgraded Amazon.com (AMZN.US) from "Hold" to "Overweight" rating. The bank stated that given the increased capacity from the Rainier project and market share loss conditions in 2025, it has greater confidence in AWS revenue acceleration in 2026.

Wells Fargo analyst Ken Gawrelski noted that the Rainier project is an AWS data center in Indiana dedicated to Anthropic computing, expected to become operational in January 2026. The Gawrelski team estimates that at full capacity (2.2GW), the facility could generate approximately $14 billion in annual revenue for AWS.

Wells Fargo raised its 2026 AWS revenue forecast by 3% and its 2027 revenue forecast by 7%. Notably, Wells Fargo currently predicts AWS revenue will grow 22% year-over-year in 2026, compared to the market consensus of 18% year-over-year growth.

Gawrelski does expect the Rainier project to pressure margins. Regarding AWS margins, Gawrelski anticipates the Rainier project will have a modest impact of approximately 50 basis points on 2026 margins. However, Gawrelski raised revenue expectations as the leverage from fixed costs will offset this adverse impact.

Nevertheless, Gawrelski still expects margins to face year-over-year pressure in 2027, while the market generally expects margins to remain stable at 2026 levels (34.3%).

As of Wednesday's U.S. market close, Amazon.com fell 0.23% to $220.21, essentially flat for the year.