Amazon (AMZN) has struggled to keep pace with the S&P 500, rising only 39% over the past five years compared to the index’s 70% gain. The stock has started 2026 on a down note, falling 9% year-to-date, largely due to concerns over its aggressive capital expenditure plans, which are projected to reach $200 billion, primarily for AI infrastructure. Despite this, Amazon’s core business remains robust, with fourth-quarter net sales increasing by 12% year-over-year and AWS revenues surging 24%, indicating strong demand for cloud services.
The significant decline in free cash flow—from $38.2 billion to $11.2 billion—has raised red flags among investors, but operating cash flow rose 20% to $139.5 billion, suggesting that the underlying business is still generating substantial cash. With shares trading at a P/E ratio of around 30, the current valuation reflects expectations of successful navigation through this investment cycle.
For market professionals, the key takeaway is that Amazon’s operational strength and AWS growth may present a buying opportunity following the stock’s recent pullback. Dive deeper into the analysis to understand the implications for your portfolio.
Source: fool.com