Amazon Stock Outlook: Earnings Growth vs Capital Spending Risks
Amazon's stock performance has been impressive, with a year-to-date gain of 7.38% and a six-month rise of 17.32%. Its market capitalization is a staggering $2.68 trillion as of September 16.
The e-commerce giant's earnings engine is accelerating, but its investment bill is enormous. In the latest quarter, Amazon's earnings per share (EPS) reached $5.75, surpassing expectations of $1.81, while revenue hit $200.60 billion, exceeding forecasts of $196.16 billion.
The stock jumped 19.82% after the July 30 release, and EPS estimates have increased by 2.69% over 60 days and 3.28% over one year. Revenue and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) have expanded, with profitability improving substantially since 2022.
However, Amazon's capital spending has surged, leading to a decline in levered free cash flow from $32.88 billion in 2024 to $7.70 billion in 2025. The company plans to spend around $200 billion on capital expenditures this year, which could further depress free cash flow and raise the hurdle for AWS returns.
AWS (Amazon Web Services) growth remains above 20%, driven by AI infrastructure spending and advertising expansion. These factors support Amazon's valuation, but regulatory pressures on AWS and advertising add risks to the company's performance.
The short-term chart is cautious, with a daily signal indicating a 'Strong Sell.' A break below $245.66 would weaken the setup, while a move above $258.62 could suggest momentum recovery.