After Lagging the Market This Year, It's Time to Buy Amazon Stock

Core Insights - Amazon is experiencing a long-term growth story despite its stock underperforming in 2025, with a year-to-date increase of only mid-single digits compared to the S&P 500's low teens growth [1][2] - The company's fundamentals are improving, creating an investment opportunity for long-term shareholders [2] Financial Performance - In Q2, Amazon's net sales increased by 13% to $167.7 billion, and operating income rose by 31% to $19.2 billion, resulting in an operating margin of 11.4%, up from 9.9% year-over-year [4] - Earnings per share for the quarter were $1.68, reflecting a 33% year-over-year increase [4] - For Q3, management expects net sales to grow between 10% and 13%, with operating income projected between $15.5 billion and $20.5 billion [4] Key Business Segments - AWS revenue grew by 17% to $30.9 billion, with an operating margin of 32.9%, although this is lower than the previous quarter due to investments in AI capacity [5] - Advertising services revenue increased by 23% to $15.7 billion, indicating Amazon's growing influence with merchants and brands [5] - The North America retail segment's operating income surged by 48% to $7.5 billion, with a segment margin of 7.5%, while the international retail segment's operating income rose from $0.3 billion to $1.5 billion, with a 16% year-over-year sales increase [5] AI and Future Outlook - CEO Andy Jassy emphasized the importance of AI in enhancing customer experiences, innovation speed, operational efficiency, and business growth [6][7] - Amazon's significant investment in AI is seen as a positive indicator of future profitability [9] Investment Considerations - Current share prices are around the low-$230s, translating to approximately 35 times earnings, which may not be considered cheap but is contextualized by improving operating margins [10] - The company is expected to see additional operating leverage as revenue increases and AWS becomes a larger revenue component [10] - The overall investment case is strengthened by improving retail margins, growing advertising revenue, and AWS's critical role in enterprise solutions [12]