Amazon Cuts AI Jobs Again - Wall Street Sees Nearly 35% Upside Anyway

Amazon.com Inc. (NASDAQ:AMZN) confirmed on July 22 that it cut jobs in its artificial general intelligence division, the unit behind its Nova AI models. The layoffs came just days before a July 30 earnings report, according to Amazon.

The cuts followed the departure of two senior AGI leaders over the past year and a larger round of 16,000 company-wide layoffs in January. You may want to weigh the news as you check up on your financial health, because analysts still see roughly 34% upside.

The latest AGI cuts and a leadership reset

Amazon eliminated roles across its AGI organization on July 22, including teams focused on model customization and post-training, according to CNBC. The company did not disclose how many employees were affected but stated the reductions aim to sharpen focus on its highest-priority customer projects. Affected U.S. employees are set to receive 90 days of pay and benefits, outplacement support, and transitional health coverage.

The division has gone through major leadership turnover. Former AGI head Rohit Prasad departed late last year, and AGI Lab leader David Luan left in February 2026, according to GeekWire. Amazon consolidated the group under senior vice president Peter DeSantis in December 2025, folding it alongside chip development and quantum computing into one broader organization.

A $200 billion spending plan anchored in AI

Amazon committed to roughly $200 billion in capital expenditures for 2026, with most of the money flowing toward AWS and AI infrastructure, according to CIO Dive. CEO Andy Jassy described the investment as a response to surging demand rather than speculation, telling investors on the fourth-quarter 2025 earnings call that the company is "monetizing capacity as fast as we can install it."

The company's 2025 capex totaled $131.8 billion, up about 59% from $83 billion in 2024, according to the company's reported results. Most of those dollars targeted data centers, custom chips, and cloud capacity. Jassy wrote in his April 2026 shareholder letter that the spending is backed by committed customer demand rather than guesswork, framing the infrastructure push as a necessity to keep pace with accelerating workloads.

Why analysts read the cuts as focus, not retreat

Slashing AI staff while committing $200 billion to AI infrastructure may look contradictory on the surface. Analysts who cover Amazon tend to interpret the combination differently, viewing targeted reductions as evidence that the company is consolidating resources around fewer, higher-impact projects rather than spreading investment too thin across competing research tracks.

Amazon also launched a $1 billion initiative to embed AWS engineers directly with enterprise customers building agentic AI systems, as reported by GeekWire. The strategy suggests a shift from foundational model research toward commercial deployment, which could accelerate revenue from infrastructure already being built.

The first-quarter numbers behind the bullish case

Amazon's first-quarter 2026 results came in above expectations. Key figures reported by CNBC included the following:

• Total revenue of $181.5 billion, up 17% year over year.
• AWS revenue of $37.59 billion, a 28% year-over-year increase.
• Operating income of $23.9 billion, a record 13.1% margin.
• Second-quarter guidance of $194 billion to $199 billion in net sales.

AWS growth of 28% was the segment's fastest in 15 quarters, fueled by a surge in AI workloads, according to CNBC. Jassy also disclosed an AWS backlog of $364 billion, excluding the Anthropic deal valued at over $100 billion, during the first-quarter 2026 earnings call.

A chip empire with $225 billion in commitments

Amazon's custom silicon business, spanning Trainium AI accelerators, Graviton CPUs, and Nitro chips, hit a $20 billion annual revenue run rate in the first quarter of 2026, growing at triple-digit percentages year over year. Customers have committed more than $225 billion in multi-year Trainium revenue, as Jassy disclosed on the first-quarter earnings call.

Amazon invested $5 billion in Anthropic in April 2026, bringing its total to $13 billion, with options for up to $20 billion more, according to CNBC. Anthropic committed to spending over $100 billion on AWS technologies over the next decade, including current and future generations of Trainium, giving Amazon a major anchor for its chip pipeline.

What 66 analysts are pricing in before July 30

Amazon shares traded near $233 on July 24, well below the consensus analyst price target of $313.13. The target reflects ratings from 66 analysts polled by S&P Global, as reported by Stock Analysis. The gap implies roughly 34% upside potential, with the highest target at $370 and the lowest at $207.

Ahead of second-quarter earnings on July 30, analysts expect revenue of about $196.71 billion and earnings of $1.82 a share, up from $1.68 a year earlier, according to TipRanks. KeyBanc raised its price target to $335 on July 16 with a Buy rating, reflecting stronger growth expectations.

Risks the bullish consensus may not capture

Amazon's aggressive spending comes at a near-term cost. Free cash flow dropped 71% to $11.2 billion in 2025 as capex surged, according to company filings. Guru Focus projects it could turn negative through 2026, and the company's ability to convert $200 billion in infrastructure investment into durable profit growth remains unproven.

Competitive pressure adds another layer of uncertainty. Microsoft Azure and Google Cloud both reported faster cloud growth rates in their most recent quarters, according to CNBC. Broader market volatility, valuation concerns, and the risk that AI spending outpaces revenue gains all represent meaningful unknowns for you as an investor weighing the stock.

Bottom line

Amazon is trimming its AGI team while pouring record capital into AI infrastructure, and Wall Street reads the combination as discipline rather than retreat. The second-quarter earnings report on July 30 could reveal how well that thesis holds up, particularly around AWS growth and the return on a massive spending plan.

For those ready to start investing, the analyst consensus suggests meaningful upside from current levels, but the risks are real. Elevated capex, competitive pressures, and the open question of how quickly AI revenue converts into free cash flow all deserve careful attention before you commit capital.

This article is for informational purposes only and should not be considered investment advice.