Amazon AMZN is benefiting from surging demand for both core cloud workloads and generative AI services, with Amazon Web Services’ (“AWS”) order backlog climbing 40% year over year to $244 billion in the fourth quarter of 2025, signaling durable multi-year revenue visibility.
Amazon’s cloud computing arm, AWS, has emerged as the clearest beneficiary of enterprise AI adoption. AWS posted fourth-quarter 2025 revenues of $35.6 billion, up 24% year over year — the segment's fastest growth in 13 quarters — pushing AWS to an annualized run rate of approximately $142 billion.
A key pillar of Amazon's AI strategy is its proprietary silicon push. The company's custom chips — Trainium and Graviton — crossed a combined annual revenue run rate of more than $10 billion, expanding at triple-digit percentages year over year. Trainium2, with 1.4 million chips deployed, powers the majority of inference workloads on Amazon Bedrock, a managed AI service now used by over 100,000 companies. Trainium3 is already delivering production workloads with nearly all 2026 supply committed, while Trainium4 is targeted for 2027. In March 2026, AWS also deepened its relationship with OpenAI, expanding an existing agreement by $100 billion over eight years, with AWS serving as the exclusive third-party cloud distribution provider for OpenAI Frontier.
Yet the path ahead carries meaningful financial risk. To sustain this AI infrastructure buildout, Amazon guided for approximately $200 billion in capital expenditures in 2026 — a sharp step-up from $131.8 billion in 2025 — with the majority allocated to AWS. That level of spending will weigh on near-term free cash flow and compress margins as depreciation rises. For first-quarter 2026, Amazon guided net sales of $173.5 billion to $178.5 billion and operating income of $16.5 billion to $21.5 billion, the wide band reflecting ongoing execution uncertainty. Whether aggressive infrastructure investment translates into proportional revenue gains will define AMZN's next chapter.
Microsoft, Alphabet Face Off in the AI Cloud Race
Amazon's AWS is not the only hyperscaler capitalizing on AI-driven cloud demand. Microsoft MSFT reported Azure revenue growth of 39% for the fourth quarter of 2025, with Microsoft's Intelligent Cloud segment reaching $29.9 billion. Microsoft guided 2026 capital expenditures significantly higher to sustain that trajectory. Alphabet GOOGL, meanwhile, posted the sharpest growth rate among the three, with Google Cloud surging 48% year over year to $17.7 billion in the same period, reaching an annualized run rate of more than $70 billion. Alphabet guided 2026 capex to $175-$185 billion. While Alphabet and Microsoft are scaling aggressively, AWS retains the largest absolute cloud revenue base, giving Amazon a structural monetization advantage even as its rivals close the growth rate gap.
AMZN’s Share Price Performance, Valuation & Estimates
Amazon shares have gained 11.3% in the past six-month period compared with the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector’s increase of 1.9% and 2.8%, respectively.
AMZN’s 6-Month Price Performance
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From a valuation standpoint, AMZN stock appears overvalued, trading at a forward 12-month price/earnings ratio of 29.2X, higher than the industry’s 24.13X. Amazon has a Value Score of D.
AMZN’s Valuation
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The Zacks Consensus Estimate for AMZN’s 2026 earnings is pegged at $7.76 per share, indicating an 8.23% increase from the figure reported in the year-ago quarter.
Amazon.com, Inc. Price and Consensus
Amazon.com, Inc. price-consensus-chart | Amazon.com, Inc. Quote
Amazon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).