Will Amazon be the winning stock of 2026?
Amazon is the second-largest retailer in the world, just behind Walmart. Everyone knows the company, and most people have purchased something from it at least once. After all, there’s hardly anything you can’t buy on Amazon. The company is a global success, not only because it is one of the largest retailers in the world, but also because it operates services such as Amazon Prime, Twitch, AWS, and several other acquired businesses.
This success makes Amazon an interesting company for many investors. A lot of capital flows into the company, and Amazon currently has a market cap of 2.47 trillion dollars. This makes it the fifth-largest publicly traded company in the world. Amazon is trading around its all-time high, which raises the important question: does it still have room to grow? That’s what we’re going to find out.
In this analysis, we will consider Amazon’s prospects in the short term (less than 5 years), the medium term (5–15 years), and the long term (15–40+ years).
Amazon a true revenue powerhouse
Amazon is the real revenue engine among the Magnificent 7 (the seven largest companies in the S&P 500). For years, the company has delivered tremendous growth in its financials. In 2020, Amazon generated 386 billion dollars in revenue. By 2024, this had grown to nearly 638 billion dollars, a substantial increase of more than 65%. But revenue, of course, is not the same as profit.
Amazon’s net profit in 2020 amounted to just over 21 billion dollars. By 2024, this had risen to more than 59 billion dollars, more than doubling and representing an increase of 180%. Since the beginning of 2021, the stock itself is up 40%.
In the image below, you can see the figures from the last five and most relevant years.
Amazon is off to a flying start in 2025
Amazon has reported impressive numbers so far in 2025. Year over year, every quarter has shown improvement. But what is driving this growth, and can Amazon sustain it? In Amazon’s most recent quarterly earnings report (Q3 2025), the company reported a significantly higher net income compared to the previous year. Amazon posted a Q3 2025 net income of $21.2 billion, equal to $1.95 in earnings per share. This represents strong growth compared to 2024, when Amazon reported a net income of $15.3 billion and earnings per share of $1.43. All of this was driven by a 13% increase in net sales in Q3 2025 versus Q3 2024. North America grew by 11%, international operations by 14%, and AWS sales grew 20% compared to 2024.
Amazon’s profitability, however, depends heavily on AWS. Thanks to its high margins, AWS contributes the largest portion of the company’s overall profit. Amazon’s retail division generates the vast majority of revenue, but because the margins are far thinner, it does not contribute nearly as much to total earnings.
Free cash flow did decline in 2025 compared to 2024. But why? The main reason is that Amazon increased its year-over-year investments in property and equipment by $50.9 billion.
This is what CEO Andy Jassy himself had to say about Amazon:
“We continue to see strong momentum and growth across Amazon as AI drives meaningful improvements in every corner of our business,” said Andy Jassy, President and CEO, Amazon. “AWS is growing at a pace we haven’t seen since 2022, re-accelerating to 20.2% YoY. We continue to see strong demand in AI and core infrastructure, and we’ve been focused on accelerating capacity – adding more than 3.8 gigawatts in the past 12 months. In Stores, we continue to realize the benefits of innovating in our fulfillment network, and we’re on track to deliver to Prime members at the fastest speeds ever again this year, expand same-day delivery of perishable groceries to over 2,300 communities by end of year, and double the number of rural communities with access to Amazon’s Same-Day and Next-Day Delivery.”
Some interesting highlights Amazon published after their last earnings in Q2
- Saw continued strong adoption of Trainium2, its custom AI chip, which is fully subscribed and a multi-billion-dollar business that grew 150% quarter over quarter.
- Launched Quick Suite agentic AI app that acts as an AI teammate – connecting to business data and apps, and letting employees interact with AI agents that can find insights, conduct research, and take actions across systems. Quick Suite helps turn month-long projects into days, get 80%+ time savings on complex tasks, and realize 90%+ cost savings.
- Added AWS Region in New Zealand, with plans for 10 more Availability Zones and three more Regions.
- Signed new AWS agreements with Delta Air Lines, Volkswagen Group, Fox Corporation, ServiceNow, Qantas Airways Limited, U.S. General Services Administration, SAP, lululemon athletica inc., Live Nation, AXA, BT Group, Vonage, Upstage, Arm, Fundamental, Periodic Labs, Cursor, Perplexity, and Lila Sciences.
- Expanded Same-Day Delivery of perishable groceries to 1,000+ cities and towns in the U.S., with plans to reach 2,300+ locations by end of 2025.
- Announced partnerships that allow advertisers to buy ad space on Netflix, Spotify, and SiriusXM Media through Amazon Ads.
- Announced planned $1.9 billion investment in Delivery Service Partner program in North America, adding to total investment of $16.7 billion over last seven years, supporting safety programs, training, and new technology.
Amazon’s latest financial guidance for whole 2025
Net sales are expected to be between $206.0 billion and $213.0 billion, or to grow between 10% and 13% compared with fourth quarter 2024. This guidance anticipates a favorable impact of approximately 190 basis points from foreign exchange rates.
Amazon is investing heavily in AI
Just like all major companies, Amazon is investing heavily in AI and in optimizing its operations. This requires significant capital and represents a major long-term investment, but so far Amazon has been delivering results. Of course, there is always a risk: investors may begin to expect Amazon to keep delivering at this pace, and if the company falls short for a period of time, the stock could experience declines.
However, if Amazon continues to perform well in the AI space, the stock price could rise exponentially, just as we’ve seen with other major companies such as:
- Nvidia
- Meta
- Oracle
- Broadcom
- Apple
- Palantir
- AMD
Amazon is keeping up remarkably well with these companies and continues to invest aggressively in AI. But unlike many of these firms, which have risen by hundreds of percent over the past few years, Amazon’s stock has not seen such extreme gains. This is precisely what makes the company so interesting. Since its peak in 2021, Amazon’s stock price is only about 20% higher today.
Does amazon have significant potential?
Since its 2021 peak, Amazon has lagged behind the other companies in the Magnificent 7, even though the company continues to grow strongly as one of the leading forces in both the U.S. and global economy. Below is a comparison of stock performance since the 2021 peak.
Here we can see that, since the 2021 peak, only Tesla has underperformed as of today. Nvidia, of course, has been the biggest winner of the AI hype, delivering a return of over 500% in just four years. Even so, Amazon still lags behind other major companies such as Microsoft (51%), Apple (77%), Meta (79%), and Google (91%).
Although all these companies are benefiting from AI, they are not growing at the same pace. But is this the case with Amazon because the company is undervalued, or because it simply isn’t growing fast enough?
Amazon’s P/E Ratio
To examine this, we can look at Amazon’s P/E ratio, an indicator that shows the relationship between a company’s stock price and its earnings. It reflects how much investors are willing to pay for every dollar of profit the company currently generates. Amazon’s P/E ratio is currently 33.15, which is very low for a company like Amazon and can be interpreted as a potential undervaluation. In recent years, Amazon’s P/E ratio has not been this low, except during years when the company reported a loss.
Amazon is still issuing new shares
n recent years, Amazon has continued to issue new shares. This normally allows the company to raise additional capital from shareholders. However, the downside is that it dilutes the value of existing shares, effectively making them worth less.
For example, imagine a company has 100 shares, with each share representing 1% of the company. If the company issues 100 additional shares, each share will now represent only 0.5% of the company. As a result, each share becomes less valuable on paper if the company’s market capitalization remains the same.
Amazon is still issuing new shares in 2025. So far this year, the company has issued an additional 94 million shares. From 2021 to the present, a total of 526 million new shares have been issued.
These shares are primarily issued to employees as compensation and to attract new talent.
Investor Jelle’s conclusion
Amazon is an outstanding company with a solid foundation for the future, and it is not going anywhere. In terms of stock performance compared to the other companies in the Magnificent 7, Amazon has indeed lagged behind, which suggests there is still significant upside potential. The company is also investing heavily in AI and AWS, understandably, as these areas offer substantial returns and are widely recognized as key growth drivers.
However, there are risks. Can Amazon meet the high expectations? What impact on the stock price could occur if the company underperforms for a few consecutive quarters? These are important factors to consider when evaluating the time horizon for investing in Amazon.
Is investing in Amazon a smart move?
Whether it is a smart decision to invest in Amazon right now, I cannot say. I am certainly not giving financial advice. I also cannot predict the future, no one can. Anyone who claims otherwise could put you at risk, so it’s best to avoid them.
What I can do, however, is outline a risk expectation for the short term (<5 years), medium term (5–15 years), and long term (15–40+ years).
Amazon is, after all, an outstanding company, and I believe it has a strong future in our economy and will continue to grow over the long term.
Short term (<5 years)
In the short term, I believe there is certainly potential for profit, but investing in Amazon also carries significant risk. AI is extremely popular right now, which has created very high expectations. This brings to mind Bill Gates his quote: “Most people overestimate what they can do in one year and underestimate what they can do in ten years.”
There is definitely potential, but investing in Amazon over the short term comes with the highest level of risk.
Medium term (5–15 years)
In the medium term, I see somewhat less risk for Amazon’s stock. This is mainly because, over this time frame, there is an opportunity to recover from any potential “crash.” There is simply more time for recovery and growth. If AI delivers on its promises, investors could see many years of substantial growth.
Our economy is also structured to continue its growth forever, which, from a technical perspective, means markets like the S&P 500 are expected to rise over the long term. Keep in mind, this growth is also influenced by the gradual devaluation of money due to inflation.
Long term (15–40+ years)
I view investors who invest in Amazon for the long term as those who prefer to take the least amount of risk while still holding shares in top-tier companies. In my view, Amazon remains one of the biggest companies in the global economy, regardless of any short-term setbacks the stock might experience over a few years. These setbacks could result from a variety of factors, but the specific cause is not necessarily important.
What matters most is that the company has enough time to recover and generate returns for its investors. In my opinion, long-term investing carries the least risk.
How high could Amazon go?
I don’t know… and honestly, no one on this planet does. The only thing I do know is that if I am sitting on a nice profit with Amazon, I tend to sell a small portion on the way up. Taking profits has never made anyone poorer. You can always buy back at a lower price, but losing all of your gains would be a waste.
Contact
Do you have questions or simply want to get in touch with me? You can reach out here!
Disclaimer
The stock analyses on this page are intended solely for informational and educational purposes. Nothing in these analyses should be considered financial advice, investment advice, or a recommendation to buy or sell any securities. Investing involves risks, and all decisions should be based on your own research and, if necessary, the guidance of a qualified financial advisor.
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.