Amazon's Pricy Growth Strains Balance Sheet
Amazon's stock price may seem puzzling to investors, given its impressive 20% net sales growth. Despite this strong performance, Amazon trades at just 22 times forward earnings.
This low valuation is likely due to the company's significant capital expenditures (capex), which have strained its balance sheet. In the second quarter of 2026, Amazon announced it would increase capex spending to $220 billion, up from an initial estimate of $200 billion in the prior quarter.
The company needs additional funding to cover the cost of memory chips, whose prices shot up amid a shortage. This comes after Amazon spent almost $132 billion on capex in 2025.
As a result, Amazon's free cash flow has fallen to -$7.6 billion over the trailing 12 months (TTM), down from $18.2 billion in the year-ago quarter. Long-term debt also increased by 96% to almost $129 billion.