Amazon's Cloud Pricing Power Meets a $2.5 Billion Refund Rollout

Goldman and Wells Fargo back Amazon on AWS pricing power as Prime settlement refunds rise to $200; capital spending hits $220 billion.

Amazon found itself on the receiving end of two very different kinds of news this week. On one side, Wall Street analysts lined up behind the company's cloud computing arm, pointing to rising prices for AI-grade server capacity as a fresh earnings tailwind. On the other, a consumer settlement tied to the company's Prime subscription began paying out larger checks to customers across the United States.

Shares responded to the bullish analyst chorus. The stock climbed 1.1% on Thursday to EUR 222.75, building on a 1.3% gain the previous day that left it at EUR 220.25. Year to date, the equity is up between 12% and 13%, depending on the session counted.

Two Banks, One Thesis

Goldman Sachs added Amazon to its monthly list of top US stock picks, while Wells Fargo reaffirmed its Overweight rating and set a price target of USD 338. Wells Fargo's case rests on something narrower than general optimism: the fees AWS charges for specialized computing capacity are heading higher.

Starting October 7, the cloud unit will raise charges for GPU reservation blocks by 15%, according to media reports — the fourth consecutive quarterly increase. Rates for modern accelerators have climbed by as much as three-quarters over the course of the year, with older chip generations set to be included for the first time at the end of 2025. These reservation blocks lock in dedicated computing capacity for enterprise customers for up to six months.

Because many clients remain tied to existing agreements, the improved pricing power will only feed through to the financials gradually. Wells Fargo expects the resulting acceleration in AWS revenue growth to show up mainly in early 2027.

Goldman's analysts take a broader view, forecasting years of steady top-line expansion paired with widening operating margins. The June quarter offered a preview of that earnings engine: AWS revenue jumped 37% year over year to USD 42.2 billion, while the segment's operating profit swelled to USD 16.6 billion. To keep pace with demand and broaden its offerings, Amazon is phasing in new instances built on modern processor architectures.

The AI Shopping Question

A separate analyst note addressed a worry that has circulated among market watchers: that autonomous AI shopping assistants could erode Amazon's lucrative advertising business. Rosenblatt Securities' Scott Devitt raised his price target to USD 360 from USD 335 on Wednesday, calling those fears overdone and lifting his long-term estimates.

The debate hinges on who controls the customer interface. If automated software agents take over product searches, traditional ad banners and click-based models risk losing relevance — a serious matter for Amazon, since retail media ranks among its highest-margin operations. Devitt counters that Amazon retains its value in the actual transaction and in logistics, and that it benefits from rising purchase volumes even if search habits shift. Early sponsored placements inside AI assistants have shown encouraging results, he notes, with customers who engage with sponsored suggestions completing purchases at a notably higher rate.

Both AWS and the advertising division posted double-digit growth in the second quarter. That momentum matters because the thinner-margin retail operation soaks up heavy logistics spending, while cloud and retail media generate the operating profit needed to fund future server and AI infrastructure.

Refunds Get Bigger

While analysts debated the future, a regulatory matter from the past moved forward. An expanded automatic refund round tied to Amazon's settlement with the Federal Trade Commission began Thursday in the US. The 2025 agreement, worth USD 2.5 billion in total, covers contested sign-up and cancellation processes for Prime subscriptions.

The agency had already distributed more than USD 845 million to eligible customers through September. Those affected signed up for Prime through unclear procedures or tried unsuccessfully to cancel the service online. As of Thursday, the maximum payout per person rises to USD 200, up from as much as USD 51 previously. Payments arrive automatically by check or online payment service. Amazon admitted no wrongdoing as part of the settlement.

Spending Weighs on Cash

The profitable growth story comes with a hefty price tag. Amazon revised its full-year capital spending plans to USD 220 billion, driven in part by higher procurement costs for key components. That enormous capital requirement left its mark on liquidity: free cash flow for the trailing twelve months swung to negative USD 7.6 billion. Investors, for now, appear willing to look past the outlay and focus on the company's dominant position in cloud computing.