- Price
- $256.61
- Fair value
- $300.00
- Discount
- 14.5%
- Uncertainty
- Medium
- LSEG rating
- 1.79
- Moat
- Wide
- Next earnings
- 2026-10-29
- Next earnings is estimate
- No
- Company name
- Amazon
- Sector
- E-commerce & cloud computing
- About
- Amazon runs two main businesses. The first is online retail. Amazon sells products directly to customers, and it lets other sellers list products on its site for a fee. The second business is Amazon Web Services, or AWS. AWS rents cloud computing, storage, and AI infrastructure to other companies. AWS produces most of Amazon's profit.
- Thesis
- Amazon plans to spend about $220 billion in 2026 on AI data centers and chips. This spending pushed free cash flow negative, and investors worry the spending will not pay off. But AWS operating margin reached 39.4% in Q2 2026, up from about 33% a year earlier. AWS's backlog of signed cloud contracts jumped by $132 billion in one quarter, to $496 billion. This backlog shows that buyers already exist for the new capacity, which could turn today's spending into tomorrow's profit.
- Risks
- Amazon's free cash flow turned negative in 2026 because of heavy AI capital spending. Full-year capital spending guidance is now about $220 billion. If AI demand grows slower than planned, this spending will not earn the expected return.
The FTC and 22 states sued Amazon in August 2026 over its advertising auction practices. Amazon also faces a separate FTC monopoly case against its marketplace, set for trial in 2027. A loss in either case could force changes to two of Amazon's most profitable businesses.
Amazon's AI capacity growth depends partly on a small number of large partners, including Anthropic, which Amazon has invested billions of dollars in. If a large partner's growth slows, or it shifts spending to another cloud provider, AWS's return on its new capacity would suffer.
- Recent events
- 2026-08-31: The FTC and 22 states sued Amazon over its advertising auction practices. The lawsuit says Amazon hid surcharges that turned second-price auctions into first-price auctions.
2026-07-30: Amazon reported Q2 2026 results. Revenue was $200.6 billion, up 20% from last year. AWS revenue grew 37%, to $42.2 billion.