Amazon’s Graviton5 Deal with Meta Fuels Record Run Ahead of Make-or-Break Earnings

Meta's three-year Graviton processor agreement sends Amazon shares to 52-week high, highlighting AWS's growing chip business and AI workload shift.

Amazon’s cloud chip strategy just got its biggest endorsement yet. Meta has signed a three-year agreement to deploy tens of thousands of Graviton processors from Amazon Web Services, placing the social-media giant among the largest customers for the in-house silicon alongside Adobe, Apple, and Snowflake. The deal, disclosed just days before Amazon’s first-quarter earnings report on April 29, sent shares to a fresh 52-week high and reinforced the narrative that the company’s massive infrastructure bet is attracting marquee clients.

The stock now trades roughly 38 percent above its April 2025 low and has surged nearly 30 percent in the past month alone. At €225.40, the shares have gained about 17 percent since the start of the year, reflecting mounting optimism that AWS will deliver another quarter of accelerating growth.

Why Graviton Matters Now

The Meta agreement is not just a volume win — it signals a shift in how AI workloads are being architected. While GPUs remain the workhorses for training large language models, the rise of agentic AI — systems that autonomously plan and execute multi-step tasks — demands massive CPU horsepower for real-time processing, code generation, and search functions. That is where Graviton5 enters the picture. Built on 3-nanometer technology, the chip packs 192 cores and a cache five times larger than its predecessor. AWS claims it cuts inter-core latency by up to 33 percent while consuming 60 percent less energy than comparable EC2 instances.

CEO Andy Jassy laid out the broader ambition in his April 2026 shareholder letter, estimating the company’s chip business could eventually be worth $50 billion. Graviton, Trainium, and Nitro together already generate an annualized revenue run rate north of $20 billion, growing at triple-digit percentages. Jassy also revealed that two large customers had tried to buy up all of Amazon’s Graviton capacity for 2026 and were turned away to preserve availability for other clients. He hinted that Amazon might eventually sell chip racks directly to third parties.

The Numbers That Matter

Consensus estimates call for first-quarter revenue of $177.2 billion, a 13 percent year-over-year increase, with adjusted earnings per share pegged at $1.63. Both figures sit at the upper end of Amazon’s own guidance range. The real focus, however, is on AWS. The cloud unit’s operating margin is forecast at 35.7 percent, well below the 37.7 percent analysts projected in October, with estimates ranging from 30.9 percent to 40.0 percent — a wide spread that underscores uncertainty about how aggressively Amazon is reinvesting.

AWS grew 24 percent in the fourth quarter of 2025, its fastest clip in 13 quarters, and Jassy noted that AWS AI revenue was running at an annualized rate of $15 billion. UBS analyst Stephen Ju raised his price target to $304, predicting AWS growth of 38 percent — far above the consensus estimate of 26 percent. BMO’s Brian Pitz, who lifted his target to $315, cited channel checks pointing to accelerating AWS momentum in the first half of 2026.

Advertising Adds a Second Engine

Beyond cloud, Amazon’s advertising business is emerging as a powerful profit driver. The segment generated $21.3 billion in revenue during the fourth quarter of 2025, growing 23 percent — well ahead of the company’s overall top-line expansion. Goldman Sachs, which raised its price target to $290, sees rising ad returns as a structural tailwind alongside AWS. Morgan Stanley, maintaining an “Overweight” rating, calls Amazon one of the most direct beneficiaries of the AI infrastructure boom.

Of the 45 analysts covering the stock, 42 rate it a Buy, with just three Hold recommendations. The consensus rating is “Strong Buy.”

The Other Side of the Coin

Not everything is smooth. North American retail margins are estimated at 6.5 percent, while international operations are expected to deliver just 3.2 percent. Tariff risks and rising energy costs are weighing on both segments. Meanwhile, Amazon’s capital expenditures have exploded — from roughly $53 billion in fiscal 2023 to an expected nearly $200 billion this year. Whether management maintains that trajectory will be one of the most hotly debated topics on the earnings call.

Bank of America projects second-quarter revenue guidance of $185 billion to $190 billion, with operating income between $17.5 billion and $21.5 billion. If Amazon hits those marks and holds margins, the market will likely view it as validation. A miss on the outlook or any sign of AWS weakness could quickly reverse the stock’s recent gains.

The Verdict Awaits

The Meta deal answers a question that has nagged investors for months: Is customer demand strong enough to justify Amazon’s aggressive AI investment program? The answer, at least for now, appears to be yes. But the real test comes Tuesday, when Amazon reports operating profit guidance of $16.5 billion to $21.5 billion — a wide range that reflects the uncertainty of a heavy investment cycle. With the stock already pricing in strength, the numbers will need to deliver.