Key Takeaways:
- Amazon reported Q1 revenue of $155.7 billion, a 10% year-over-year increase.
- AWS continues to experience robust growth with a 17% increase to a $117 billion annualized run rate.
- Its AI business now operates at a multibillion-dollar annual run rate with triple-digit growth.
- Multiple growth drivers position AMZN stock for sustained expansion across cloud computing, advertising, and AI.
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Amazon (AMZN) delivered impressive first-quarter results that underscore the technology giant’s resilience and growth trajectory despite ongoing economic uncertainties.
Its diversified business model and strategic investments in artificial intelligence and cloud infrastructure continue to drive substantial value creation.
AMZN stock has demonstrated remarkable performance over the past several years, with the company’s comprehensive ecosystem of services positioning it advantageously in a global digital economy.
However, let’s examine whether Amazon stock represents a compelling investment opportunity at current levels.
1. AMZN Stock to Benefit From AI and Cloud Computing
Amazon’s key growth driver remains Amazon Web Services (AWS), which generated $29.3 billion in Q1 revenue, indicating a 17% year-over-year growth.
The cloud computing division now operates at a $117 billion annualized run rate, with substantial runway for expansion given that over 85% of global IT spending remains on-premises.
“Before this generation of AI, we thought AWS had the chance to ultimately be a multi-hundred billion dollar revenue run rate business. We now think it could be even larger,” stated CEO Andy Jassy during the earnings call.
The company’s AI business has reached multibillion-dollar annual run rates while maintaining triple-digit year-over-year growth percentages.
Amazon’s strategic investments in custom AI chips, particularly Trainium 2, offer 30-40% better price-performance versus other GPU-based instances.
This technological advantage positions AMZN to capture increasing AI workloads as organizations seek cost-effective solutions for artificial intelligence implementation.
The Amazon Bedrock platform continues to expand its foundation model offerings, recently adding Anthropic’s Claude 3.7 Sonnet and Meta’s Llama 4 family.
Amazon’s proprietary Nova models are gaining traction with thousands of customers, including major enterprises like Slack, Siemens, and Coinbase.
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2. AMZN Stock to Benefit From Advertising and Retail Innovations
Amazon’s advertising business generated $13.9 billion in Q1 revenue, a 19% year-over-year increase on an increasingly large base.
The platform reaches over 275 million ad-supported users in the U.S. alone, offering brands full-funnel advertising capabilities across entertainment properties, live sports, and the core marketplace.
The retail business continues demonstrating operational excellence through fulfillment network optimization.
Amazon’s redesigned inbound architecture enables better inventory placement, reducing delivery costs while achieving record delivery speeds for Prime members. For instance, the e-commerce giant has delivered more same-day and next-day items in Q1 than in any quarter in its history.
Despite tariff uncertainties, Amazon’s diversified seller ecosystem, comprising over 2 million global sellers, provides a competitive advantage. Its extensive selection of hundreds of millions of SKUs, combined with its price-focused strategy, positions it favorably during economic disruptions.
“Amazon is not uniquely susceptible to tariffs,” noted Jassy, explaining that the company’s direct relationships with Chinese sellers often provide better cost structures than competitors buying through intermediaries.
3. A Strong Balance Sheet
Amazon enters this growth phase with robust financial metrics. It reported operating income of $18.4 billion, up 20% year-over-year, while maintaining disciplined capital allocation. Trailing twelve-month free cash flow reached $25.9 billion, providing substantial resources for continued expansion.
Amazon’s North America segment achieved 6.3% operating margins, while International operations reached 3% margins. Excluding one-time charges related to inventory management and customer returns, these margins would have been approximately 90 and 70 basis points higher, respectively.
Amazon’s capital expenditure strategy focuses on supporting long-term growth opportunities. Q1 capex of $24.3 billion primarily supported AWS infrastructure expansion, including data center development and custom silicon development, alongside enhancements to the fulfillment network.
AWS demonstrated strong profitability with operating income of $11.5 billion and margins approaching 40%, reflecting the scalability of cloud infrastructure services. The segment’s $189 billion backlog, with a weighted average remaining life of 4.1 years, provides visibility into revenue and confidence in growth.
Management’s guidance for Q2 anticipates continued strong performance, with revenue expected to be between $159 billion and $164 billion and operating income between $13 billion and $17.5 billion.
Valuation Setup for AMZN Stock
Despite the massive run-up in AMZN stock, its valuation remains compelling relative to its growth trajectory.
Analysts tracking Amazon stock expect its sales to rise from $638 billion in 2024 to $837 billion in 2027, an annual increase of 9.5%. Comparatively, adjusted earnings are forecast to expand from $5.53 per share to $8.91 per share in this period.
AMZN stock currently trades at a forward price-to-earnings multiple of 33x, which is below its five-year average multiple of 61x.
If AMZN stock is priced at a multiple of 30x and reaches its projected $8.91 in normalized EPS, it will trade around $267/share in June 2027, indicating an upside potential of 25% from current levels. The above valuation model predicts AMZN stock to surpass $300 by the start of 2028.
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Average Analyst Price Target for AMZN Stock
Wall Street remains bullish on AMZN stock, with a consensus price target of $241/share. Analysts expect the stock to rise around 13% from current levels over the next 18 months.
Notably, AMZN stock currently has a high target price of $305 and a low target price of $195.
Of the 72 analysts tracking Amazon stock, 66 recommend “Buys”, four recommend “Hold”, and two recommend “Sell.”
TIKR Takeaway for AMZN Stock
Amazon’s first-quarter results demonstrate the company’s ability to execute across multiple growth vectors simultaneously. The combination of AWS expansion, AI innovation, advertising growth, and retail optimization creates a compelling investment thesis for long-term value creation.
With over 85% of global IT spending still on-premises and AI adoption in early stages, Amazon faces substantial growth opportunities. Its track record of reinvesting profits into growth initiatives while gradually expanding margins suggests sustainable competitive advantages.
The launch of Alexa+ and continued AI investments position Amazon at the forefront of the next computing paradigm shift.
As artificial intelligence becomes increasingly integrated into business operations and consumer experiences, Amazon’s comprehensive AI infrastructure and applications provide a competitive advantage.
For investors seeking exposure to cloud computing, artificial intelligence, and digital advertising secular growth trends, Amazon represents a diversified play on multiple transformative technologies.
Its scale advantages, operational excellence, and innovation capabilities position it favorably for continued market leadership and value creation.
FAQs
1. What is the market cap of AMZN stock?
The market cap of AMZN stock is $259 billion, as of June 25, 2025.
2. How much has AMZN stock returned in the last 10 years?
In the last 10 years, AMZN stock has returned close to 800%.
3. What is the price target for AMZN stock?
The average AMZN stock price target is $240.60.
4. Is Amazon a Buy, Sell, or Hold?
Out of the 72 analysts covering Amazon stock, 66 recommend a “Buy”.
5. Does AMZN stock pay shareholders a dividend?
No, Amazon does not pay shareholders a dividend.
6. What is the 3-Year Forecast for Amazon stock?
Our valuation model projects Amazon stock to reach $302 in 2028.
7. Is AMZN stock overvalued?
Given consensus price targets, AMZN stock trades at a discount of 13% in June 2025.
8. What is the P/E ratio for AMZN stock?
The forward P/E ratio for AMZN stock is 33x.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
