Amazon Stock Is Underperforming Badly in 2025. What It Needs in Q4.

Core Insights - The S&P 500 Index is up 13.3% year to date, nearing record highs, with all Magnificent 7 stocks positive for the year, including a rebound in Apple and Tesla [1] - Amazon has underperformed compared to its peers in the Magnificent 7, with the stock barely in the green this year and trading flat for the last three months [2] Group 1: Amazon's Performance - Amazon's stock rally from 2022 lows was driven by optimism over growth in Amazon Web Services (AWS) and cost-cutting measures that improved margins, with AWS returning to double-digit growth [4] - AWS's growth has lagged behind Microsoft Azure and Google Cloud, with AWS's operating margin falling to 32.9% in Q2 2025 from a record high of 39.5% in Q1, attributed to higher stock-based compensation and depreciation expenses [5] - Amazon's North America segment's operating margins were 7.5% in Q2, indicating that margin expansion potential appears limited [6] Group 2: Competitive Landscape and Challenges - Amazon's top-line growth has been disappointing, with Q3 guidance below market expectations, facing competitive pressure from Walmart in the U.S. e-commerce sector [7] - A recent $2.5 billion settlement with the Federal Trade Commission over allegations of misleading customers regarding Prime subscriptions has negatively impacted sentiment towards Amazon [8]