🤔What is the Market Momentum column about?🤔
I don't know if you're aware of this, but a thorough fundamental in-depth analysis can take 40-50 hours. As an investor, it's impossible to put that much energy into analyzing each company if you want to effectively manage a long enough watch list. That's why I created the Market Momentum column, which provides a snapshot of each stock, currently Amazon (AMZN), and roughly outlines current events. It is not an in-depth analysis, but rather just food for thought based on the current state.
My goal is not to give daily trading tips or analyze technical patterns. Instead, I provide quick, to-the-point fundamental mini-analyses that help you filter. These impulses help you keep in mind whether the current price movement of Amazon (AMZN) or another market participant deserves deeper investigation or is just a passing market phenomenon.
If you are looking for in-depth analyses of the site, click on the link below: iO Charts stock analyses.
📒Table of Contents📒
I have created a table of contents to make it easier for you to navigate the content:
- ❓What is Amazon (AMZN) doing?
- 🏆Amazon (AMZN) Current Status and Competitors
- 🎢Amazon (AMZN) metrics
- ✅Amazon (AMZN): will you get used to it or will you run away?
- 📝Summary of the thesis
❓What is Amazon (AMZN) doing?❓
Amazon (AMZN) is now one of the most difficult companies to categorize. If someone says that Amazon (AMZN) is an online store, they are right – but it is also equally true that it is a cloud provider (AWS), an advertising platform, a streaming service, a logistics giant, an artificial intelligence infrastructure developer and a pharmaceutical player all at once.
The company started in 1994 by selling books online, founded by Jeff Bezos from Seattle. But today's Amazon (AMZN) goes far beyond its e-commerce roots: its revenues reached $716,9 billion in 2025, and the company relies on three fundamentally different business pillars.
The first and largest pillar is e-commerce and related services: the North American and international retail segments, the Amazon marketplace (which is the world's second largest search engine when it comes to purchase intent), Prime membership, streaming, and Amazon Haul (the company's low-cost, Temu-like offering). This accounts for nearly 74% of revenue.
The second – and by far the most profitable – pillar is Amazon Web Services (AWS): is the cloud infrastructure service that was introduced in 2006 and is now the clear market leader in the global cloud market. AWS accounts for just 18% of revenue, but generates nearly 57% of total operating profit.
The third, fast-growing pillar is the advertising business, which is expected to reach $68,6 billion in revenue in 2025. – this segment is one of the highest-margin areas within the entire company.
📌 In practice: Many people still tend to think of Amazon as an online store, but this approach is misleading. Amazon is actually a technology infrastructure company with a huge, low-margin retail leg. Understanding this is key to interpreting the numbers correctly. It’s also important to understand which business unit has the highest margins and growth, as this can determine where the company goes in the long term.
🏆Amazon (AMZN) Current Status and Competitors🏆
Amazon is fighting its competitors on multiple fronts at once, which is a rare and complex situation for an investor. You have to face different competitors in different segments.
On the e-commerce front, Walmart (WMT) and Target (TGT) are building an increasingly serious omnichannel presence, while low-priced products like Temu and Shein are specifically targeting price-sensitive shoppers, and I haven't even mentioned Alibaba yet. Amazon's response in this segment was to regionalize its logistics network (faster and cheaper delivery), launch Amazon Haul, and expand Prime benefits.
On the cloud services front, Amazon (AMZN) is paying the most attention to three players:
- 🌐 Microsoft Azure: the second largest player in the cloud market, with a growth rate that exceeded AWS: Azure grew by 39% in Q2 2025, compared to 17.5% for AWS. Azure's main strength is its close strategic alliance with OpenAI and deep integration with the Microsoft 365 ecosystem.
- 🔍 Google Cloud (GCP): third largest player in the market, with 32% growth in Q2. Gemini's AI model integration and lower pricing make it increasingly attractive.
- 💻 Developer of own chips: Amazon itself is involved in chip design. The Trainium and Inferentia chips are aimed at reducing dependence on Nvidia, which positions them as both a competitor and an internal developer.
AWS's market share in the global cloud market is currently around 31%, Azure is around 20-22%, and Google Cloud is around 12%, according to data from Synergy Research Group (Synergy Research Group). Absolute revenue dominance has therefore remained, but the growth rate is slower than that of its competitors – this is one of the most important issues that investors should pay attention to.
📌 In practice: AWS's slower % growth is coming from a much larger base, so a direct comparison isn't entirely fair. When Azure grows 39%, it's coming from a smaller absolute revenue base. Also, AWS is currently not constrained by customer demand, it's constrained by capacity - meaning there are orders but not enough data centers to accommodate them. This is more good news than bad news, but you'll see it show up on the capital investment side.
🎢 Amazon (AMZN) Metrics 🎢
📊 Exchange rate and valuation
Amazon's share price has fallen by about 21% in the past few months, currently trading around $200 (as of February 2026). The stock hit a new high of around $258 in November 2025, and was then pressured by the strong capex forecast following the Q4 earnings report. In other words, Amazon (AMZN) is burning more and more money on its various investments, which is interesting because it is already acting as a growth constraint and pulling it back.
In terms of valuation, Amazon is not a classic cheap stock, but the numbers need to be put into context. The current forward P/E is around 27-28x, which is high – but the combined growth dynamics of AWS and the advertising segment justify the premium, as you will see in the next chapter.
🪙Valuation: EV/NOPAT vs. price
Since the price alone doesn't tell us much about whether a company is cheap or expensive, we need to look at the underlying fundamentals. As I wrote in the previous two Market Impulse articles, I often compare EV/NOPAT to the price to see whether operating profit moves in line with the price or not.
However, this alone is not enough to determine whether a stock is cheap, since you don't know what the historical average was, but I calculated this for you:
- 🎯NOPAT yield currently: 2.94%
- 🕒NOPAT yield 3-year average: 2.4%
- 📊NOPAT yield 5-year average: 1.82%
- 🗓️NOPAT yield 10-year average: 1.45%
- 📜NOPAT yield 20-year average: 1.28%
The current NOPAT yield is significantly higher than historical values, and the beauty of this is that Amazon (AMZN) has grown into its own coat, and the fundamentals have actually outpaced the valuation.
🪙 Revenue and profitability
The full-year numbers for 2025 show a very strong picture:
- 💵 Total annual income: USD 716.9 billion (+12% YoY)
- 🏗️ AWS revenue: USD 128.7 billion (+20% YoY for the year, +24% in Q4)
- 📈 Advertising revenue: USD 68.6 billion (+22% YoY)
- ⚖️ Operating profit: 80 billion USD (compared to ~68 billion in 2024)
- 🏆 Net profit: USD 77.7 billion (+31% YoY)
- 📖 EPS: $7.17/share (was $5.53 in 2024)
- 🌊 AWS operating margin: Up to 35%
- 📉 Gross margin: 50.3%
The most important number is AWS growth for Q4 2025: 24% – the fastest growth in the last 13 quarters. This data confirms that expanding AI capacity is delivering real revenue returns. The Bedrock platform (Amazon’s system that offers both its own AI models and third-party models) has become a multi-billion dollar business, with customer spend up 60% QoQ.
What is important is how revenue growth is related to capital expenditure. In the image above, you can see that Amazon (AMZN) is investing heavily in AI-related spending, which primarily means server parks, AWS expansion, and other AI projects. Among others, one of the largest investors in Anthropic's Claude is Amazon (AMZN), along with Google, which is also developing Gemini. I think they call this "cut-throat competition," but the market is growing so fast that it can accommodate several gigabytes of players for now.
But there's a catch: Amazon (AMZN) is set to spend about $200 billion on AI-related costs in 2026. That's one reason why it's nearly impossible to accurately capture Amazon's true spending on AI in its income statement. Much of the $200 billion in capex forecast for 2026 doesn't even show up directly on the income statement — it's treated as a capitalized asset and written off over a number of years. That's why profit margins may seem healthy while the company is pouring huge sums into AI infrastructure.
🤞 Efficiency: ROIC and free cash flow
Return on capital indicators show a mixed picture – which is partly normal in an investment cycle of this magnitude.
- 📈 ROIC: 12.9% (above WACC, but by a narrow margin, the connection here is that if ROIC is greater than the weighted average cost of capital, then Amazon (AMZN) is truly creating value)
- 💰 ROE: 22.3%
- 💵 Operating cash flow: USD 139.5 billion (TTM)
- 🏗️ Capex: ~132 billion USD (and forecast around 200 billion USD by 2026)
- 📉 Free cash flow: only ~7.7 billion USD (due to huge capex)
📌 In practice: The dramatic drop in free cash flow is what scares most investors – and rightly raises questions. Amazon has forecasted $200 billion in capex by 2026, a more than 50% increase compared to 2025. This will push free cash flow to almost zero in the short term. The question is when will this infrastructure investment translate into revenue and profit growth. AWS’s backlog is currently ~$195-200 billion, which is a serious guarantee of committed future revenue. And there was a similar case in early 2023, when the company also made huge expansions. If you scroll back to the very first image, you can see a drop of over 50%.
🎲 Risk factors: debt and capital allocation
- 💵 Cash and short-term investments: ~123 billion USD
- 👛 Net debt: ~$55 billion (debt exceeds cash)
- 🫰 Dividend: 0
- 📉 Share buyback: active program running
Amazon’s balance sheet isn’t as fortress-like as Nvidia’s or Apple’s – but for a company with $716 billion in revenue, the ~$55 billion in net debt is entirely manageable. Of course, it’s worth looking at how much net profit and cash generated each year are. The former hovered around $77 billion and the latter around $33 billion until the cost of capital skyrocketed. But, the company could essentially pay off its current debt in a single year if it wanted to.
The real risk is that free cash flow is severely constrained in the midst of a $200 billion annual capex cycle, and if the return on AI investments lags behind expectations, it could put serious downward pressure on prices. As you can see in the Market Impulse article on Nvidia (NVDA), the costs are staggeringly high, and it is not yet clear how they will be recovered and who the real winner of the AI race will be. You can read the other article here: Nvidia (NVDA) – The engine of the AI era or an overblown bubble?
✅ Amazon (AMZN): will you get used to it or will you run away? ❌
As with all companies, there are two narratives when it comes to Amazon (AMZN). One is supported by optimists and one by pessimists, and I have given a few examples of this.
🐂 Bulls say (Optimistic scenario):
- 💭AWS acceleration: AWS's 24% growth in Q4 2025 is a clear sign that increased capacity is finding real demand. The migration of AI workloads to the cloud creates a structurally sustainable growth trajectory. In theory, but in practice, there is no end in sight to the costs.
- 🏷️Advertising superpower: Amazon's advertising business is expected to generate $68,6 billion in revenue in 2025, up 22%. It's one of the highest-margin businesses—and it's still relatively early in terms of its potential revenue.
- 🛒Logistics competitive advantage: Amazon's continent-sized logistics network, built over years, now offers a speed and reliability that competitors cannot replicate in the foreseeable future.
- 🌐AI ecosystem: The strategic investments in Bedrock, Trainium, Inferentia, and Anthropic together cover the entire AI infrastructure vertical. This integrated approach provides a strong long-term defense.
📌In practice: What surprised me was that if an internet user's intention is to buy, Amazon is already the second largest search engine in the world. Amazon is a real spawner company, every few years they attack a new market segment and become successful there. This is unlikely to change anytime soon, as they have been doing this since the 90s, quite successfully.
🐻 Bears say (Pessimistic scenario):
- 🗓️Capex spiral: The $200 billion investment forecast for 2026 surpasses all other Magnificent-7 members. If AI demand doesn’t deliver the expected returns, that amount will tie up free cash flow for years. We’ve seen this picture before with Facebook in 2022, when the Metaverse sucked up capital and the stock price collapsed. It then soared from $90 to $700 after the company, then called Meta, gave up on its ambitions.
- 💨Losing AWS Growth Premium: Azure and Google Cloud are consistently growing faster on a % basis than AWS. If this trend continues, it will lead to a market share realignment over time.
- 🎁Structural pressure of e-commerce: Temu, Shein and TikTok Shop are increasingly attracting young shoppers, especially in low-priced categories. Amazon Haul is the answer, but it is questionable whether its brand image is compatible with a long-term discount positioning.
- 🎲Regulatory risk: the Federal Trade Commission reached a $2.5 billion settlement with Amazon in 2025. Antitrust scrutiny is ongoing, and any crackdown on the marketplace model could have serious business consequences.
📌In practice: Regulatory risk is in the air for all mega-corporations, but it's true for Google, Microsoft, Apple, and many other multinationals. The biggest risk for Amazon (AMZN) in my opinion is the intense competition and the return on the huge costs of AI.
📝 Summary of Amazon (AMZN) 📝
Amazon reached a milestone in 2025 that the market had long been waiting for: AWS growth accelerated again, the advertising business exploded, and annual revenue exceeded $716 billion. In this sense, the fundamentals are strong – the question is not whether Amazon is a good business, but what the current price is pricing in.
The real investment decision is around capex. If the $200 billion 2026 investment cycle translates into AWS revenue and improved margins as expected, Amazon could see sustained EPS growth above 20-25%. If not—or if Azure continues to strengthen its relative position—the current premium valuation will be difficult to sustain.
Amazon is not expensive at all, especially compared to a quality growth company whose short-term risk is the capex cycle and whose long-term competitive advantage is the depth of integration and logistical economic competitive advantage.
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❓ Frequently Asked Questions: professional questions about Amazon (AMZN)
1. What is AWS and why is it Amazon's most important business?
Amazon Web Services is Amazon's cloud infrastructure service, launched in 2006. It provides server, storage, database, and AI capacity to companies on a rental basis. Although it accounts for only 18% of total revenue, nearly 57% of the company's operating profit will come from this segment in 2025.
2. Why is Amazon's free cash flow so low when its revenue is so high?
Amazon is currently in a record infrastructure investment cycle. The ~$128 billion capex in 2025 and ~$200 billion projected in 2026 will go to expanding AWS data center capacity, driven by demand for AI workloads. This will squeeze free cash flow to near zero in the short term, but operating cash flow (~$140 billion) remains strong.
3. How does Amazon compete with Azure and Google Cloud in the AI market?
Amazon positions itself in the AI market with the AWS Bedrock platform (where it offers third-party AI models, including Anthropic's Claude), its own chips (Trainium, Inferentia) and a direct investment in Anthropic. Azure's alliance with OpenAI, and Google Cloud's Gemini model family are its main AI attractions.
4. Does Amazon (AMZN) pay dividends?
No. Amazon currently does not pay a dividend, and uses free capital for development and share repurchases. This follows the typical capital allocation logic of growth companies.
5. What is Amazon Bedrock and why is it important?
Bedrock is Amazon's platform for companies to access and deploy various AI base models into their own applications (including models from Anthropic Claude, Meta Llama, Mistral, etc.). It is expected to generate multi-billion USD in annual revenue by 2025, with customer spending growing 60% quarter-over-quarter. It is a key pillar of AWS's AI strategy.
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