The Q3 2026 earnings season for “Magnificent 7” stocks is looking a lot like the previous quarter. In a reminiscence of the Q2 earnings season, both Tesla (TSLA) and Meta Platforms (META) plunged following their respective Q3 earnings last week, taking down the entire artificial intelligence (AI) universe with them. The earnings season gains pace this week, with Microsoft (MSFT), Amazon (AMZN), and Alphabet (GOOG) (GOOGL) releasing their September quarter reports.
Tech Stocks Have Weakened as AI Trade Flounders
In the last earnings season, Microsoft gained the most among its Mag 7 peers following its confessional. The stock continued to build on the gains and rose an impressive 38% in Q3, clocking its best quarter since 1998. It went on to hit its record closing high last Tuesday and reclaimed its $4 trillion market cap before earnings from fellow Mag 7 companies dampened sentiment.
More Top Stocks Daily: Go behind Wall Street’s hottest headlines with Barchart’s Active Investor newsletter.
Amazon’s story has been a bit different from Microsoft's, and it failed to hold onto its post-Q2 earnings gains. In a previous article, I noted that investors shouldn’t expect a big rally in MSFT stock following its fiscal Q1 2027 earnings. Let's dive into how to play Amazon stock as the AI trade flounders.
www.barchart.com What to Expect From Q3 Earnings
Amazon guided for Q3 revenues to rise between 9% and 12% year-over-year (YoY). Analysts are modelling the company’s Q3 earnings per share (EPS) to rise 30.8%. During the Q3 earnings call, enterprise-focused Amazon Web Services (AWS) and the AI business, including the chip segment, would garner most attention. However, I would also watch the commentary on consumer health, given the deteriorating macro environment. Consumers globally have been hurting from higher inflation, particularly elevated energy prices, which is taking a toll on discretionary spending. To make things worse, interest rates are on an upward trajectory, hurting the monthly budgets of many middle-and-lower income families.
How Do Analysts Rate AMZN Stock Before Q3 Earnings?
Sell-side analysts have mostly made cursory adjustments to Amazon’s target price—both on the upside and downside—ahead of its Q3 earnings. There have been some notable changes, though. For instance, famed tech analyst Dan Ives initiated coverage on Amazon at his recently formed Yorkville Ives with an “Outperform” rating and a $300 target price, while Tigress Financial analyst Ivan Feinseth raised the stock’s target price from $315 to $385.
Morgan Stanley analyst Brian Nowak named Amazon as a Top Pick and believes AI could drive AWS revenues to over $1 trillion. As a note of caution, Amazon has been a “top pick” for analysts for the last few years, but the stock hasn’t been able to live up to expectations. AMZN stock is up around 47% over the last five years, which trails not only the tech-heavy Nasdaq 100 Index ($IUXX) but also the more diversified S&P 500 Index ($SPX). In fact, among its Mag 7 peers, AMZN is the second-worst performer and has fared better than only Tesla, whose shares are almost flat over the period.
www.barchart.com How to Play Amazon Stock?
I have been bullish on Amazon stock this year and maintain my stance as the Andy Jassy-led company heads into its Q3 confessional. There are legit concerns about agentic AI negatively impacting Amazon’s lucrative digital advertising business, and the company’s once-enviable free cash flows are falling prey to burgeoning AI capex. Furthermore, the growth in the company’s e-commerce operations in developed markets has slowed.
I, however, believe the risks are overblown and markets are overlooking the AI opportunity, including from third-party chip sales. In the e-commerce business, competition from the likes of Walmart (WMT) is rising, but Amazon has built an enviable ecosystem that is challenging to emulate.
Amazon’s business has several moving parts, like Prime and digital advertising, that complement each other. Despite concerns about some aspects of its business, Amazon has a reasonably strong outlook, with AI being an enabler of both topline and bottomline growth.
In terms of valuation, AMZN stock trades at 23.2x its expected 2027 EPS, which is quite attractive. I remain invested in Amazon and believe the recent weakness in the stock, coupled with tepid valuations, raises the possibility of a post-earnings rally unless the company comes up with dud numbers.
On the date of publication, Mohit Oberoi had a position in: META , MSFT , TSLA , AMZN , GOOG . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
Lumentum Just Scored a New 'Buy' Rating. Here's Why. Meta Stock Alert: Meta: The $25 Billion Legal Blow Investors Cannot Ignore A $95 Billion Reason Why META Stock Is in Focus Today How to Play Amazon Stock Before Q3 Earnings as the AI Trade Flounders