Amazon Stock Trailing Market Due to Free Cash Flow Concerns
Amazon's stock has been on a rollercoaster ride this year, but despite its impressive rebound, it's still trading at an all-time low price-to-earnings (P/E) ratio of 21 times trailing-12-month earnings. The market is pricing Amazon's stock so low because of concerns over the company's massive capital expenditures (capex), which are expected to reach $220 billion in 2026 alone.
However, CEO Andy Jassy believes that Amazon Web Services (AWS) will become a trillion-dollar business, citing its impressive revenue growth. In the second quarter of 2026, AWS saw a nearly 37% year-over-year increase in revenue, the highest level in 18 quarters.
The issue lies with free cash flow, which has dipped into negative territory over the past few years as Amazon continues to spend heavily. Despite its excellent performance and promising future prospects, Amazon's stock may not see significant gains until it returns to reliable positive free cash flow.