Wolfe Research is forecasting a near-term earnings drag for Amazon stemming from higher fuel costs and has adjusted its fiscal 2026 operating income (OI) estimates downward by a low-single-digit percentage. Despite the revision, the firm retains a favorable view on the company.
In a research note, analyst Shweta Khajuria specified the timing of the impact, saying the firm expects a 2-point headwind to operating income in the first quarter and a mid-single-digit percentage (MSD%) headwind in the second quarter.
The revision is tied to a sharp rise in diesel prices, which have moved above $5 per gallon and are more than 30% higher than levels before the U.S.-Iran conflict. Given Amazon's extensive logistics operations, Wolfe projects this escalation will meaningfully increase shipping costs.
Wolfe estimates that fuel makes up roughly 15% of Amazon's shipping expense base. The note models year-over-year fuel inflation of 12% for the first quarter and 35% for the second quarter if diesel prices remain elevated through those periods. On that basis, the firm quantifies incremental fuel-driven costs of about $400 million in Q1 and approximately $1.2 billion in Q2.
Even after trimming its forecasts for the first half of the fiscal year, Wolfe says its operating income and revenue projections remain above the consensus. The firm reports being 4.4% higher than the Street on OI and 1.0% higher on revenue.
Khajuria also highlighted a potential pricing lever that could help offset fuel-driven margin pressure. Wolfe estimates that a $20 increase in U.S. Prime subscription pricing could largely counterbalance the fuel headwind. Using the firm's estimate of 85 million Prime member households in the U.S., a $20 increase would translate into about $1.7 billion of incremental, high-margin revenue. Wolfe is not incorporating such a price increase into its published estimates.
At the policy level, the analyst noted that the Trump administration is reportedly considering a release of 1 to 1.5 million barrels of oil per day from strategic reserves, which could relieve diesel prices and therefore limit the incremental cost burden.
Wolfe Research maintained an Outperform rating on Amazon and adjusted its price target to $245, down from $250.
Separately, an AI-driven stock screening product referenced in the broader market commentary evaluates AMZN and other companies across multiple financial metrics. That product claims to identify investment ideas using AI and cites past winners including Super Micro Computer (+185%) and AppLovin (+157%). The research product states it does not include bias in its process. The Wolfe note did not incorporate any inputs from that product into its published estimates.
Key takeaways from Wolfe's note include quantified incremental fuel costs in the first half of the fiscal year and the acknowledgement of a potential revenue offset through higher Prime pricing. The firm balances these near-term pressures with its existing bullish rating on Amazon.