Core Viewpoint - Amazon's stock has underperformed in 2025, rising only 6% compared to the S&P 500's 16% increase, but there are expectations for a strong rebound in 2026 driven by its cloud computing and advertising services [1][2]. Business Segments - Amazon's e-commerce division, while the largest by revenue at $67.4 billion, grew only 10% year over year in Q3, making it the third-slowest-growing segment [4]. - Amazon Web Services (AWS) experienced a significant growth of 20% year over year in Q3, contributing 66% of Amazon's operating income despite accounting for only 18% of total revenue [8][9]. - Advertising services have become Amazon's fastest-growing segment, with a 24% increase in ad revenue in Q3, indicating a positive trend heading into 2026 [9]. Future Outlook - The success of AWS and advertising services is expected to drive Amazon's stock performance in 2026, with potential for market-beating returns if Q3 results continue [10]. - Amazon's stock is currently valued at nearly 30 times next year's earnings, which is a premium compared to its historical valuation, posing a risk if the stock underperforms again [11][13]. - Despite the valuation concerns, if Amazon maintains strong performance, it is considered a stock worth buying now [13].

Core Viewpoint - Amazon's stock has underperformed in 2025 compared to the S&P 500, raising questions about its future potential and whether it should be prioritized by investors as the year ends [1][2]. E-commerce Performance - Amazon's e-commerce segment experienced a 10% year-over-year growth in Q3, marking one of its best quarters in a long time [5]. - Third-party seller services also rose by 12%, indicating strong performance in this area as well [5]. Valuation Concerns - Amazon's stock has been trading at a premium valuation, averaging around 30 times forward earnings, which is considered high given its growth rates around 10% [6][8]. - The combination of high valuation and moderate growth has limited the stock's potential [8]. Profit Drivers - The majority of Amazon's profits come from its other business units, particularly Amazon Web Services (AWS) and advertising services [9]. - AWS revenue grew by 20% in Q3, driven by increased demand for cloud computing and AI workloads [10]. - Although AWS accounted for only 18% of total sales in Q3, it contributed 66% of operating income, highlighting its profitability [11]. Advertising Growth - Amazon's advertising services grew revenue at an impressive 24% in Q3, leveraging consumer data from its e-commerce platform [13]. - High margins in advertising are expected to enhance overall profitability, similar to trends seen in other advertising-focused companies [14]. Future Outlook - The fastest-growing segments, AWS and advertising, are also the highest-margin ones, suggesting that profits will increase at a faster rate than revenue [15]. - The anticipated acceleration in AWS growth and strength in advertising positions Amazon for a strong performance in 2026, making it an attractive investment opportunity [15].

Core Viewpoint - Amazon is close to joining the $3 trillion valuation club, currently holding a market cap of $2.5 trillion, with significant growth potential ahead [2][10]. Company Segments - Amazon's e-commerce platform is well-known, but its most promising segments are Amazon Web Services (AWS) and its advertising division, which are the fastest-growing areas of the company [3][4]. - AWS is benefiting from trends in cloud computing, particularly the rise of artificial intelligence and the shift from on-premise computing to cloud solutions, which is driving its growth [6][7]. Financial Performance - In the third quarter, AWS revenue grew by 20% year-over-year, contributing 66% of Amazon's total operating income, with a strong operating margin of 35% [8]. - The advertising segment, while smaller than AWS, is the fastest-growing, with a 24% year-over-year revenue increase in the third quarter, indicating high profit margins similar to those of AWS [9]. Growth Outlook - Amazon needs approximately 20% growth to reach the $3 trillion market cap, and with its recent acceleration in growth, it could achieve this milestone by the end of next year if spending is managed effectively [10][12]. - The company is projected to be a strong investment choice for 2026, with a high likelihood of reaching the $3 trillion club by 2027 if market conditions remain stable [12].

Core Insights - Amazon.com, Inc is experiencing strong momentum in its retail business and significant growth in its AWS cloud division, driven by increasing demand for AI services [1] - The company is well-positioned for continued growth and improved profitability due to a healthy retail division, accelerating AI demand, and a rapidly expanding advertising business [1] E-commerce and Retail Strength - The core retail business is supported by positive consumer spending sentiment, with strong results from Prime Day and the Prime Big Deal Days indicating ongoing momentum [4] - Despite competition from platforms like Temu, Shein, and TikTok Shop, Amazon remains relatively insulated among incumbent e-commerce platforms [5] AWS and AI Acceleration - Investor concerns about AWS's growth relative to competitors are acknowledged, but optimism remains due to strong underlying demand reflected in backlog growth and increased capital expenditure guidance [6] - AWS's AI business is growing at a triple-digit rate, with a strategic partnership with AI startup Anthropic expected to significantly contribute to revenue growth in 2025 and 2026 [6] High-Margin Business Mix - The rapidly expanding advertising business is identified as a key growth pillar, with a clear path to sustainable margin improvement driven by a shift towards AWS and advertising, optimizations in the fulfillment network, and increased automation [7] Financial Projections - The company is projected to exceed operating income expectations, with third-quarter revenue estimated at $179.37 billion (up from $177.84 billion) and EPS at $1.57 (up from $1.45) [8]

Core Insights - Amazon's market capitalization has exceeded $2.3 trillion, driven by strong performance in e-commerce and Amazon Web Services (AWS), alongside growing optimism in artificial intelligence (AI) [1] - Advertising has emerged as a significant and rapidly growing revenue stream for Amazon, benefiting from its extensive data and the shopping intent of its visitors [2] Advertising Growth - Amazon's advertising services revenue increased by 23% year-over-year to approximately $15.7 billion in Q2 2025, with 22% growth when excluding currency impacts, following an 18% growth in Q1 [4] - Key drivers of this growth include increased shopping activity, enhanced ad tools, the rollout of Prime Video ads, and partnerships in connected-TV (CTV) that expand ad serving capabilities [4] - A notable partnership with Roku has allowed Amazon to reach an estimated 80 million U.S. households, enhancing advertiser reach into high-engagement streaming [4] Strategic Importance of Advertising - Advertising represents high-margin revenue that complements Amazon's extensive retail and media ecosystem, contributing to the company's profit growth [6][8] - The integration of various advertising formats, including retail search, brand placements, and a demand-side platform (DSP), allows Amazon to align advertiser goals with shopper intent effectively [5] - The advertising business is reshaping Amazon's profit engine, providing a long runway for growth alongside AWS [7]

Core Viewpoint - Amazon has the potential to be a top growth stock due to its strong base business and rapidly growing divisions, particularly in advertising and cloud computing [1][2]. Group 1: Business Segments and Growth Drivers - Amazon's North American commerce divisions generated $7.5 billion in operating profit on $100 billion in sales in Q2, indicating that the e-commerce segment is not as profitable as perceived [4]. - The advertising services division is the fastest-growing segment, with a 23% year-over-year revenue increase in Q2, contributing significantly to Amazon's overall operating profits [5]. - Amazon Web Services (AWS) reported a 33% operating margin, benefiting from the AI arms race as clients rent computing resources for AI model training, despite a decrease from Q1's 39% margin due to increased spending on capacity [7]. Group 2: Market Trends and Projections - The global cloud computing market is projected to grow from $752 billion in 2024 to $2.39 trillion by 2030, indicating strong future demand for AWS [8]. - Amazon's operating profits increased by 31% in Q2, and a conservative growth rate of 20% is projected through 2030, leading to an estimated $210 billion in operating profits by the end of that year, a 172% increase from current levels [9][11]. - If Amazon maintains a valuation of 25 times operating profits, the company could reach a market cap of $5.3 trillion, translating to a stock price of approximately $492 by 2030 [11][12].

Core Insights - Amazon has shown consistent performance in 2025, with ongoing discussions about the impact of artificial intelligence on its financials [1] - The company is focusing on its most profitable segments, which, along with effective cost management, positions it for healthy earnings growth [2] Financial Performance - In Q2, Amazon's net sales increased by 13% year-over-year to $167.7 billion, while operating income rose by 31% to $19.2 billion [4] - AWS revenue grew by 17.5% to $30.9 billion, and advertising services increased by 23% to $15.7 billion, both exceeding overall growth and contributing higher margins [4][5] - The earnings per share improved to $6.55 from $4.18 year-over-year, reflecting enhanced earnings power [5] Business Segments - AWS accounted for approximately 18% of total revenue, while advertising services made up over 9%, indicating a shift towards higher-margin business areas [5] - AWS has an operating margin of about 37%, significantly higher than the overall company's margin of around 11% [6] Future Guidance - For Q3, Amazon anticipates revenue between $174 billion and $179.5 billion, representing a year-over-year increase of 10% to 13%, with operating income projected between $15.5 billion and $20.5 billion [7] - The guidance suggests improved operational efficiency compared to two years ago, supporting steady revenue and earnings growth [7][8]

Core Viewpoint - Amazon is positioned to surpass Apple in market capitalization over the next five years due to superior growth rates and profit margins driven by its business segments [1][2]. Business Units and Growth Drivers - Amazon's growth is primarily driven by two business units: Amazon Web Services (AWS) and advertising services, rather than its online store [4]. - AWS generated nearly $31 billion in revenue in Q2, growing 17% year over year, despite facing strong competition from Microsoft Azure and Google Cloud [6][7]. - The advertising services segment is Amazon's fastest-growing area, with revenue increasing by 23% year over year, indicating a strong demand for advertising on its platform [8][9]. Profit Growth and Margins - Amazon's operating income rose 31% year over year in Q2, significantly outpacing Apple's 11% increase in operating income for Q3 FY 2025 [11]. - The growth of high-margin businesses like AWS and advertising services has contributed to rising profit margins for Amazon, positioning it for substantial profit growth over the next five years [10][11]. Market Position and Future Outlook - Analysts expect Amazon's profit growth rate to be much faster than Apple's, with projections indicating a 271% increase in operating income over five years for Amazon compared to a 69% increase for Apple [11]. - This trajectory suggests that Amazon could surpass Apple in size, making it an attractive stock pick for investors [12].

Core Viewpoint - Apple and Amazon, both part of the "Magnificent Seven," have shown strong long-term returns, but current growth rates raise questions about their investment appeal [1] Group 1: Revenue Growth - Both Apple and Amazon have experienced relatively slow revenue growth, with each company growing less than 10% in their most recent quarter [3][5] - Apple's growth issues stem from a lack of innovative products and a lengthening smartphone turnover cycle, leading to less frequent consumer upgrades [6][7] - Amazon's e-commerce segments, while significant, are the slowest-growing parts of its business, impacting overall growth rates [8] Group 2: Profitability - Amazon's high-margin segments, such as AWS and advertising, are growing rapidly, with AWS generating 63% of operating profits despite only accounting for 19% of total sales [10] - In Q1, Amazon's operating profits increased by 20% year over year, significantly outperforming Apple's 6% growth in operating profits [11] - Amazon's profit growth is driven by its strong-performing segments, providing a catalyst for earnings growth that Apple currently lacks [12]

Core Insights - Amazon's e-commerce business is not the primary profit driver, with other segments contributing more significantly to profits [1] - AWS generates the majority of Amazon's operating profits, accounting for 63% of operating profits in Q1 with a 40% operating margin [3][10] - The advertising segment is the fastest-growing part of Amazon's business, with an 18% year-over-year revenue growth in Q1 [6][10] Revenue Breakdown - Online stores generated $57.4 billion in Q1, growing 5% year-over-year, making up 37% of total revenue [2] - Third-party seller services brought in $36.5 billion, with a 6% growth, accounting for 23% of total revenue [2] - AWS revenue was $29.3 billion, growing 17% year-over-year, representing 19% of total revenue [2] - Advertising services generated $13.9 billion, with an 18% growth, making up 9% of total revenue [2] Profit Contribution - AWS and advertising services combined accounted for an estimated 86% of Amazon's operating profits in Q1 [10] - If advertising services are assumed to have a 30% operating margin, they would have generated approximately $4.2 billion in operating profits, contributing about 23% to total operating profits [9][10] Future Outlook - AWS is expected to continue strong growth due to the increasing demand for cloud computing, particularly in AI infrastructure [4][5] - Advertising growth may face challenges during economic downturns, but Q1 figures suggest resilience, and potential shifts in product pricing could lead to increased advertising needs [11][12]