AWS Monetizes Capital Twice
AWS earns twice on every dollar of capex, powering both clients and Amazon’s own retail network, driving $132B annualized revenue and 20% YoY growth.
Amazon: AWS Capacity Lead or Circular Financing Trap: Amazon's AI Bet
AWS hit fastest growth in 11 quarters while adding more capacity than rivals, but Q3's beat includes $9.5bn Anthropic gains and declining FCF. Trainium adoption is limited to Anthropic while market share erodes.
Updated: Oct 31, 2025
Consumer
Bull & Bear Case
An overview of the main reasons to invest and the key risks involved.
Bull Case
Trainium Chips Drive Margin Expansion
In-house chips cut Nvidia reliance, boost efficiency, unlock billions in savings.
Laggard Valuation Creates Long-Term Opportunity
Stock trades below peers despite accelerating cloud momentum, creating catch-up opportunity.
Bear Case
AWS Market Share Erosion
Share slipped as Azure and Google Cloud capture enterprise workloads faster.
Circular Financing and Revenue Quality
Anthropic gains mask weak organic demand; free cash flow fell sharply.
Consumer Spending Collapse and Valuation Disconnect
Soft retail spending and debt-funded capex strain cash flow, margins.
Executive Summary
Amazon is a global technology juggernaut operating across e-commerce, cloud computing, digital advertising, devices, and streaming entertainment. It serves hundreds of millions of customers through its flagship online marketplace, delivers cloud infrastructure via AWS, and operates an ecosystem spanning retail, logistics, artificial intelligence, and business procurement solutions. Amazon is also a platform for third-party sellers, supports enterprise and public sector clients, and is increasingly pushing into digital health and sustainability initiatives.
For investors, Amazon matters because it anchors a vast, high-growth ecosystem with strong competitive moats in logistics, cloud services, and data-driven retail. The company is a relentless innovator, expanding margins in AWS and digital ads, while leveraging scale to defend its dominant market shares. Recent profit growth, a robust Prime subscription base, strategic international expansion, and vertical integration in logistics and AI-driven capabilities translate to a compelling case, Amazon is not just riding the digital retail wave; it's setting the global agenda.
Investment Thesis
Overview of buy and sell case of the business.
Why Invest?
Key pieces of information about the business that you need to know about.
AWS Monetizes Capital Twice
AWS hit $132 billion annualized revenue with 20% year-over-year growth in Q3 2025, its fastest pace in 11 quarters and roughly 25% larger than Azure. AWS added 3.8 gigawatts of cloud capacity year-to-date, more than any competitor, with backlog exceeding $200 billion excluding October contract wins. Azure's growth was constrained by capacity shortages while AWS scaled aggressively, with infrastructure simultaneously powering external customers and internal retail operations.
Trainium Chips Drive Margin Expansion
Trainium chips growing over 150% represent a multi-billion dollar business offering cost efficiency versus Nvidia alternatives. Trainium 2 and 3 accelerators challenge Nvidia by offering comparable cost efficiency and scaling, though Blackwell/GB200 leads in raw performance for high-end workloads. Underlying operating performance improved significantly excluding redundancy charges, with AI-driven automation projected to save $4 billion annually while boosting margins structurally across AWS and retail operations.
Laggard Valuation Creates Catch-Up
Stock rallied 13% post-Q3 beat but remains a laggard versus big tech peers, creating valuation catch-up opportunity at 34x forward earnings. CEO Andy Jassy operates distinctly from Bezos, prioritizing capital discipline and margin expansion. AI drove "meaningful improvements" validating $125 billion fiscal 2025 capex. Project Rainier infrastructure with 500,000 Trainium2 chips operational and scaling toward 1 million demonstrates AWS's expanding influence in foundational AI computing.
Catalysts
The key events that could drive investment opportunities and shift markets.
Q4 Earnings and Holiday Execution: Look out for whether AWS sustains its fastest growth pace in over two years following the strong Q3 showing, while retail margins hold above target levels and same-day delivery converts into profitable Prime member expansion. Watch whether holiday demand tests robotics scaling successfully and whether advertising revenue accelerates beyond current growth rates.
Trainium Adoption Beyond Anthropic: Watch for external customer wins beyond Anthropic to validate Amazon's custom silicon strategy against Nvidia-dependent competitors, as AWS projects doubling capacity by year-end while Trainium2 adoption determines whether AWS can recapture lost market share.
AWS Market Share Stabilization: Watch whether AWS reverses its market share decline by converting its substantial backlog into sustained revenue growth that matches or exceeds Azure and Google Cloud, as Bedrock's model diversity and AI agent tools position AWS to recapture enterprise hybrid cloud deals.
Advertising Revenue Trajectory: Look out for whether advertising revenue maintains its current growth trajectory driven by Rufus AI assistant adoption and video ad monetization, as continued acceleration positions Amazon closer to Meta's advertising multiple than cloud infrastructure comps.
Vertical Integration of AI Economics: Watch whether AWS captures meaningful share of enterprise AI training workloads through its multi-gigawatt Anthropic clusters and Trainium roadmap, as owning the full stack from chip design to energy procurement to model deployment could support significant margin expansion and valuation rerating.
Key Risks
Key pieces of information about the business risks that you need to know about.
AWS Market Share Erosion
AWS holds 30% global cloud share, down from 32% in 2023. Azure grew 40% and Google Cloud 34% in Q3 2025, while AWS managed 20%, raising concerns that acceleration isn't sufficient to prevent Microsoft from capturing leadership by 2027. Trainium chips lack external validation beyond Anthropic, forcing Amazon to install Nvidia GPUs to retain clients.
Circular Financing and Revenue Quality
Amazon's Q3 beat includes $9.5 billion non-cash gain from Anthropic equity revaluation, funded by Amazon's own cash and cloud credits that return as AWS revenue, a closed-loop structure that masks organic demand weakness. Free cash flow fell to $14.8 billion trailing twelve months as capex hit $125 billion, increasingly debt-funded rather than operating cash flow.
Consumer Spending Collapse and Valuation Disconnect
US consumer is "tapped out", discretionary spending weakens across retail indicators while Walmart trades at higher valuation multiples than Amazon despite being brick-and-mortar transitioning to e-commerce. Tariffs compress margins without immediate pricing pass-through, and workforce reductions risk service degradation during peak periods.
Follow the Experts
Quickly navigate key insights from industry experts and leverage their knowledge and market intelligence.
Expert Insights
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alright folks… Amazon is officially the worst performing Mag 7, up 1% YTD hard to imagine we end the year with S&P around 6800-6900 and $AMZ stays flat two reasons I think its down: 1.) tariffs actually effect their commerce business, we saw that with operating...
Expert Insights
x
"Amazon owned Zoox has just launched a limited Las Vegas commercial robotaxi service following years of testing in the city. Riders are allowed to go to five locations free of charge, including Resorts World..."
Expert Insights
x
Yes, Amazon has performed poorly YTD. Luckily, we aren't forced to buy the stock on the first day of the year only, we can buy dips. I'm in for 600 shares at $150 average. Amazon is up +30% from just a few months ago. The stock won't continue to climb however, until...
Finance Flash
German Buy-Hold-Check investor
1.49K audience
Expert Insights
seeking_alpha
Despite Google being the "purer" play into Cloud and Ads, Amazon seems to be the better pick right now. Even in the bear case, investors are only overpaying by ~6%. This, paired with the potential upside of up to 86% and the strong positioning in the core segments, continues to make Amazon a Strong Buy...
Investor Materials
Access the most recent investor updates published by the company.
Key Documents
Amazon.com Announces Third Quarter Results
ArticleLaunched earlier this year, the Accelerator is looking for companies that could support Amazon Devices & Services efforts to reduce the carbon impact of millions of Amazon devices.
2025 Q2 results
PDF2024 Annual Report
PDFPress Releases
Nasdaq and AWS to Advance Capital Markets and Banking Infrastructure Across the Financial System
ArticleStrategic cloud deployment of Nasdaq Calypso on AWS will empower institutions to modernize end-to-end infrastructure, enhance resilience and unlock innovation at scale
Amazon's share price value determinants: Using machine learning algorithms
PDFAmazon’s Costly Space Race Is Grounding Profit Margin Hopes
PDFExternal Insights
A curated collection of third-party content relevant to the company and sector to help inform your investment decision.
Spotlight on Amazon
Amazon
ArticleBeyond The Cart
Amazon's Zoox robotaxi opens to public with free service in Las Vegas
ArticleTeam
Meet the experienced professionals leading our organization
Jeffrey P. Bezos
Andy Jassy
Brian T. Olsavsky
Douglas J. Herrington
What the Pro's Are Asking
Here are the questions that professional investors are asking before making an investment decision.
How did Amazon perform financially in Q2 2025?
Amazon’s Q2 2025 saw revenue jump 13% to $167.7 billion, driven by robust demand in both core e-commerce and digital advertising. Operating income hit $19.2 billion, a hefty 31% increase year-over-year. Net income climbed to $18.2 billion, resulting in strong profit margins and earnings per share of $1.71, easily topping analyst forecasts. Retail sales, advertising, and AWS all contributed, though AWS growth slightly lagged Big Tech rivals. The company cited effective cost control and increased Prime engagement as tailwinds for overall profitability and scale.
What impacted AWS’s earnings and outlook this quarter?
AWS grew 17% in Q2, reaching $30.9 billion in revenue, keeping pace with analyst expectations. However, competitiveness from Azure and Google Cloud pressured market share and margins. Amazon raised AI investment and changed depreciation schedules, which increased costs and trimmed segment net income by $379 million. Despite these headwinds, AWS remains Amazon’s main profit driver, and management indicated AI infrastructure (Nova models, Alexa+) would be central to future growth. Leadership expects margin improvement but warned of ongoing capital intensity as cloud rivals gain ground.
How is Amazon’s retail, Prime, and advertising business trending?
The retail segment continued to expand, with North American sales climbing 11% and international up 16% (excluding currency effects). Advertising was a breakout star, up 23% year-over-year to $15.6 billion, making it Amazon’s fastest-growing major business. Prime subscriptions and member engagement also rose, reinforcing recurring revenues and deepening consumer loyalty. While tariffs and labor costs caused some strain, management pointed to supply chain innovation and ad-driven discovery as keys to consumer resilience during the quarter.
What risks and headwinds did management highlight in Q2?
Management emphasised uncertainty from US trade policies and shifting tariff regimes, with CEO Andy Jassy noting that costs could rise if new tariffs are imposed. There is also concern about the competitive threat from AI-powered rivals and the need for higher ad spending to maintain visibility. Regulatory scrutiny remains a persistent backdrop, particularly regarding marketplace practices and antitrust pressure. The company is investing heavily in automation to counter supply chain and labor cost volatility.
Did Amazon’s cash flow or capital structure materially change this quarter?
Amazon’s operating cash flow stayed strong during Q2, fully supporting ongoing massive investments in logistics networks, data centers, and proprietary video content. Long-term debt and short-term borrowings were managed within expectations, preserving ample liquidity for future expansion. The company’s balance sheet reflects confidence in its ability to fund growth initiatives while absorbing periodic macro headwinds, especially those related to tariffs, cost inflation, and regulatory developments.