Amazon's Cloud Services Show Strong Growth
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 day ago
0mins
Should l Buy AMZN?
Source: Fool
- Cloud Growth: Amazon Web Services (AWS) achieved a 24% year-over-year growth in Q4, marking its best performance in three years, indicating a recovery in competitiveness that is likely to enhance overall company performance.
- Chip Design Advantage: The use of in-house designed chips has driven AWS's cloud computing business to triple-digit growth in Q4, showcasing Amazon's significant cost-reduction capabilities that may attract more enterprise clients.
- Significant Profit Contribution: Although AWS accounted for only 17% of Amazon's total revenue, it generated $12.5 billion in operating income in Q4, contributing to 50% of the company's overall operating profits, reinforcing investor confidence in Amazon's profitability.
- Optimistic Future Outlook: With AWS's ongoing growth in the AI sector, Amazon's overall performance is expected to remain strong, particularly in 2026, making it crucial for investors to monitor potential stock price increases following the post-earnings sell-off.
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Analyst Views on AMZN
Wall Street analysts forecast AMZN stock price to rise
44 Analyst Rating
41 Buy
3 Hold
0 Sell
Strong Buy
Current: 199.600
Low
175.00
Averages
280.01
High
325.00
Current: 199.600
Low
175.00
Averages
280.01
High
325.00
About AMZN
Amazon.com, Inc. provides a range of products and services to customers. The products offered through its stores include merchandise and content it has purchased for resale and products offered by third-party sellers. The Company’s segments include North America, International and Amazon Web Services (AWS). It serves consumers through its online and physical stores and focuses on selection, price, and convenience. Customers access its offerings through its websites, mobile apps, Alexa, devices, streaming, and physically visiting its stores. It also manufactures and sells electronic devices, including Kindle, Fire tablet, Fire TV, Echo, Ring, Blink, and eero, and develops and produces media content. It serves developers and enterprises of all sizes, including start-ups, government agencies, and academic institutions, through AWS, which offers a set of on-demand technology services, including compute, storage, database, analytics, and machine learning, and other services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Capital Expenditure Plans: Amazon plans to increase capital expenditures to $200 billion by 2026, a 56% rise from $128 billion in 2025, raising investor concerns about the company's financial health, particularly regarding its significant investments in AI infrastructure.
- Accelerating Cloud Growth: Amazon Web Services (AWS) saw a 24% revenue increase in Q4, the fastest growth in 13 quarters, with CEO Andy Jassy noting that the custom chip business has surpassed a $10 billion annual revenue run rate, indicating that AI investments are beginning to yield returns.
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See More
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- Stock Decline: Amazon's stock has dropped 14% year-to-date and has faced a nine-day losing streak, the longest since July 2006, although Wall Street believes the stock is undervalued with a median target price of $285, indicating a potential 43% upside.
- Strong Financial Results: Despite narrowly missing earnings expectations, Amazon reported a 14% year-over-year revenue increase to $213 billion in Q4, driven by robust growth in advertising and cloud computing, highlighting the company's competitive position in rapidly growing markets.
- Capital Expenditure Plans: Amazon plans to increase capital expenditures to $200 billion by 2026, a 56% rise from $128 billion in 2025, raising investor concerns about the company's financial health, particularly regarding its significant investments in AI infrastructure.
- Accelerating Cloud Growth: Amazon Web Services (AWS) saw a 24% revenue increase in Q4, the fastest growth in 13 quarters, with CEO Andy Jassy noting that the custom chip business has surpassed a $10 billion annual revenue run rate, indicating that AI investments are beginning to yield returns.
See More
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- Valuation Pullback Justified: Despite significant revenue and earnings growth, Amazon's stock has declined by approximately 7% since 2025, with its PE ratio dropping to 26.5 times, reflecting a market reassessment of its valuation, potentially providing a reasonable buying opportunity for investors.
- Capital Expenditure Plans: Amazon plans to invest $200 billion in capital expenditures in 2026, primarily for data center construction, which may impact cash flows; however, if AI computing demand continues to grow, this investment will support future business expansion.
- Investor Confidence Recovery: Although the Motley Fool analyst team did not include Amazon in their current best stock picks, analysts believe that Amazon is poised for a stock rebound in 2026, indicating a recovery in market confidence regarding its future performance.
See More
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- Space Data Center Concept: Google's initiative aims to harness uninterrupted solar power in space to alleviate cooling constraints, with Pichai describing it as a 'moonshot' akin to Waymo's ambitions, indicating high aspirations for technological advancement.
- Reliance on Technological Breakthroughs: Pichai notes that the feasibility of this initiative hinges on significant breakthroughs in launch technology by Musk's SpaceX, showcasing the potential for developing space-based infrastructure.
- Divergent Market Reactions: While Alphabet Class A shares have surged 50.23% over the past six months, Amazon's stock has declined by 14.13%, reflecting differing market perceptions regarding the economic viability of space data centers.
See More
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- Operational Efficiency Gains: With over 1 million robots deployed in its distribution centers, coordinated by the DeepFleet AI model, Amazon has significantly improved delivery speed and operational efficiency, which is driving robust growth in its e-commerce business.
- Advertising Revenue Growth: Amazon's high-margin sponsored ad business saw a 22% revenue increase last quarter, becoming a key driver of its operating income growth and showcasing its strong competitive position in the digital advertising space.
- Cloud Computing Market Leadership: Holding the number one market share in cloud computing, Amazon's revenue growth accelerated to 24% in Q4, the highest in over three years, indicating that the company will continue to invest aggressively in response to booming demand for AI infrastructure, with capital expenditures projected to reach $200 billion by 2026.
See More
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- Net Worth Decline: Armstrong's net worth plummeted by over $10 billion from a peak of $17.7 billion in July 2025, now standing at $7.5 billion, primarily tied to his 14% stake in Coinbase, reflecting a broader decline in confidence in the cryptocurrency market.
- Analyst Rating Divergence: Goldman Sachs upgraded Coinbase to a 'Buy' with a $303 price target on January 5, citing growth in non-trading revenue as a buffer against market cycles, while JPMorgan cut its target by 27% on Tuesday, highlighting declining trading volumes and softness in crypto prices.
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See More
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- Operational Efficiency Gains: With over 1 million robots deployed in its distribution centers and coordinated by the DeepFleet AI model, Amazon has not only increased delivery speed but also significantly enhanced operational efficiency, driving sales growth.
- Advertising Revenue Surge: Amazon's high-margin sponsored ad business saw a 22% revenue increase last quarter, becoming a key driver of its operating income growth and further solidifying its leading position in the global digital advertising space.
- Cloud Computing Market Leadership: Holding the number one market share in cloud computing, Amazon's revenue growth reached 24% in Q4, the highest in over three years, indicating its commitment to invest $200 billion in capital expenditures to meet the booming demand for AI infrastructure.
See More
