Analysis of Amazon and Google's Cloud Computing Potential
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 14 2026
0mins
Should l Buy AMZN?
Source: Yahoo Finance
- Cloud Business Growth: Amazon's AWS contributed 50% of operating profits in Q4, highlighting its critical role in the overall business, with a year-over-year growth rate of 24%, indicating that AI demand is driving this growth.
- Strong Performance of Google Cloud: Google Cloud achieved a remarkable 48% year-over-year growth in Q4, with an impressive operating margin of 30%, showcasing significant growth potential in the cloud sector, expected to continue strongly in the coming years.
- Market Valuation Comparison: Both Amazon and Alphabet trade at a premium to the S&P 500's 21.7 times forward earnings, yet Microsoft and Nvidia present more attractive valuations, reflecting differing market perceptions of these tech giants.
- Cautious Investment Advice: Despite the strong performance of Amazon and Alphabet's cloud businesses, analysts advise investors to remain cautious in the current market environment and consider other investment options that may offer better value.
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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: 210.570
Low
175.00
Averages
280.01
High
325.00
Current: 210.570
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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- Substantial Capital Expenditure Increase: Management expects capital expenditures to reach $200 billion in 2026, sharply up from $131 billion in 2025, reflecting Amazon's ambitious goals in AI and a significant financial commitment to infrastructure development.
- Diversified Revenue Support: Although Amazon's trailing-12-month free cash flow fell to $11.2 billion, its operating cash flow increased by 20% year-over-year to $139.5 billion, demonstrating strong performance in high-margin segments like advertising and subscriptions, enabling self-funding for AI infrastructure investments.
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See More
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- Optimistic Guidance: Management anticipates a 9% sequential revenue increase in the first quarter, projecting adjusted EPS of $0.79, indicating sustained growth potential in AI infrastructure, particularly within the data center segment.
- Collaboration with Nvidia: Nvidia's announcement of a $2 billion investment in Marvell, coupled with a product partnership, is expected to enhance Marvell's market position in AI infrastructure, particularly in the application of photonic networking technologies.
- Diversified Customer Base: Marvell has added Microsoft as a client, with Microsoft's Maia2 chip likely to drive further business growth in AI chips, demonstrating the company's adaptability and strategic positioning in a competitive market.
See More
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- Massive Market Potential: The AI robotics market is projected to reach $375.8 billion by 2035, with a compound annual growth rate of 17.33%, presenting significant growth opportunities for companies like Tesla and Amazon, thereby attracting investor interest.
- Amazon's Acquisition Moves: Amazon recently acquired Fauna Robotics, focusing on developing friendly humanoid robots for home and business use; although it lags behind Tesla in the robotics sector, its substantial cash reserves and innovation focus could enable it to catch up quickly.
- Warehouse Optimization Progress: Over the past year, Amazon has launched over a million AI-powered robots to optimize warehouse operations, and while the short-term financial impact may be limited, significant revenue could be realized if the market grows as projected.
See More
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- Optimistic Outlook: Management anticipates a 9% sequential revenue growth in Q1, guiding for adjusted EPS of $0.79, reflecting confidence in its data center business, particularly with a projected 40% growth in data center revenue for fiscal 2027.
- Strategic Investment: Nvidia's announcement of a $2 billion investment in Marvell, coupled with a product partnership, aims to integrate their technologies to advance the development of next-generation optical networking products for AI data centers, reinforcing Marvell's leadership in networking technology.
- Diversified Customer Base: The addition of Microsoft as a client, with its Maia2 chip leveraging Marvell's technology, indicates enhanced competitiveness in the AI chip market and alleviates concerns regarding potential market share loss with Amazon.
See More
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- Valuation Timing: Ackman entered these three companies at P/E ratios of 16, 25, and 20 during periods of weak market sentiment, indicating a strategy focused on finding value amidst uncertainty, potentially laying the groundwork for future earnings growth.
- Capital Expenditure Plans: In 2026, Alphabet plans to invest $175 billion to $185 billion, while Amazon and Meta are set to spend $200 billion and $115 billion to $135 billion on AI-related investments, demonstrating their commitment to technological innovation.
- Cash Reserve Advantage: As of December 31, 2025, these three companies collectively held $331 billion in cash and cash equivalents, significantly exceeding their long-term debt, indicating strong financial capacity for future investments and market volatility management.
See More
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- Profit Margin Squeeze: The ongoing U.S.-Iran war has driven diesel prices to historic highs, causing College Hunks Hauling Junk's operating costs to rise from a historical 3-5% to 6-10%, severely compressing profit margins and forcing the company into a pricing dilemma.
- Consumer Spending Constraints: Rising fuel prices are impacting discretionary spending, with economists noting that consumers are likely to cut back on non-essential items first, which could slow overall economic growth and put more pressure on small businesses.
- Airlines Adjust Pricing: Major airlines like United Airlines and JetBlue have begun raising baggage fees to cope with rising operating costs, reflecting the flexibility of larger companies in adjusting prices, while smaller businesses face greater survival pressures.
- Policy Response Limitations: The Federal Reserve has not indicated a willingness to lower interest rates to stimulate the economy, with market expectations leaning towards potential rate hikes, further increasing financing costs for businesses and consumers and exacerbating economic uncertainty.
See More
