Amazon Stock Under Pressure as Cloud Growth Fails to Offset Declining EPS

Amazon's stock price has been underperforming this year, currently trading at $249.38, which is $80 below Wall Street's consensus target of $329.54. The company's earnings per share (EPS) for fiscal 2026 were a reported $5.75, but after stripping out the one-time gain on its Anthropic stake, the comparable EPS was roughly $1.88.

Amazon Web Services (AWS), the cloud division of Amazon, has been a major contributor to the company's growth, with a 37% increase in revenue and a $496 billion backlog of future revenue. However, this growth has come at the cost of negative free cash flow, which is projected to be -$7.6 billion for fiscal 2026.

The company's planned capital expenditures for fiscal 2026 are around $200 billion, which has raised concerns about the sustainability of its growth and the potential impact on EPS in future years. Despite this, analyst estimates for AWS' revenue continue to grow, with some projecting it could reach at least double a few hundred billion dollars in annual revenue.

While Amazon's stock price may be attractive to investors due to its low multiple of 24x, it is essential to consider the company's underlying financials and growth prospects. The bear case for Amazon's stock suggests that investors should be cautious given the falling EPS estimate for fiscal 2027 and the potential for depreciation to suppress reported earnings.