Is Wall Street Wrong About Amazon Stock?

Core Viewpoint - Amazon has underperformed compared to stock market indexes in recent years, with a cumulative stock increase of only 22% over the last five years, while the S&P 500 has returned 87% [1] Group 1: Financial Performance - Amazon's fourth-quarter earnings report has led to negative sentiment among investors due to ambitious capital spending plans that may result in negative free cash flow by 2026 [2] - AWS revenue grew 24% year over year to $35.6 billion, with expectations for further acceleration in 2026 [4] - Operating earnings reached a record high of $85 billion over the last 12 months, driven by rising AWS revenue and margin expansion in retail operations [8] Group 2: Capital Expenditures - Amazon plans to spend $200 billion on capital expenditures this year, significantly up from $132 billion last year and $83 billion the year before [4] - This level of spending exceeds Amazon's projected operating cash flow of $140 billion for 2025, raising concerns about future free cash flow [5] Group 3: Long-term Outlook - The heavy upfront investments in data center infrastructure are expected to lead to negative free cash flow in the short term, but this is viewed as a bullish sign for long-term growth and revenue expansion [5][6] - The consolidated operating margin was 11.8% in 2025, with expectations that it could reach 15% or higher over the next decade due to trends in AI infrastructure and high-margin business growth [9]