Amazon is three businesses in one: the largest online store, the largest cloud (AWS) and a fast-growing advertising arm. AWS growth sped up to 39% in the third quarter, its fastest in almost five years, but Amazon said spending will rise again in 2027 from about $220 billion this year, and it now borrows to pay for it. The price still assumes that spending pays off handsomely.
Today’s close against the report’s numbers, updated every weekday. The analysis is as of October 30, 2026; the rating as of October 22, 2026. Both change only when the report is revised.
The cash-flow model’s bear-to-bull range, the probability-weighted value, the price and its 52-week range. The copper line marks the base case; the fine dotted line is today’s close.
Written on October 30, 2026, the morning after its third-quarter results. Figures are from the company’s filings and releases unless noted. Not investment advice. The author holds AMZN shares. Earlier published versions, kept unchanged: October 20, 2026 (Hold, value $153).
Amazon reports three segments. North America and International are the store: first-party retail, third-party seller services, Prime subscriptions and advertising. AWS rents computing, storage and AI infrastructure to companies and governments.
Most of the profit comes from AWS and advertising, which ride on the store’s traffic. Retail itself earns thin margins but funds the logistics network that keeps customers loyal. Amazon also owns a large stake in Anthropic, the AI company, which it does not value in its operating results.
Takeaway. Value comes mostly from AWS and ads; the store is the moat that feeds them.
Third-quarter revenue rose 12% to $201.9 billion, slightly below the $202.3 billion analysts expected; moving Prime Day into the second quarter took about four points off growth. AWS revenue grew 39% to $46.0 billion with $17.8 billion of operating income, and its backlog reached $578 billion. Operating income of $28.1 billion, a record 13.9% margin, beat the $22.5–26.5 billion guidance; North America earned 7.7% on sales and International 3.7%. Advertising grew 11% to $19.6 billion. EPS of $1.89 was below the $1.96 expected.
The cost is in cash flow: free cash flow over the last twelve months was negative $42.4 billion as Amazon defines it, because capital spending (net of proceeds) rose 82% in a year, to $211 billion. Capital spending is still guided to about $220 billion for 2026, and management said it will “rise meaningfully” in 2027. Long-term debt has risen to $173 billion from $66 billion at the end of 2025. Guidance for the fourth quarter is $240–247 billion of revenue and $28.5–33.5 billion of operating income. The shares, which closed at $243.79 before the report, fell about 6% in after-hours trading.
| FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | TTM Jun 2026 | |
|---|---|---|---|---|---|---|
| Revenue | $469.8B | $514.0B | $574.8B | $638.0B | $716.9B | $775.7B |
| Operating margin | 5.3% | 2.4% | 6.4% | 10.8% | 11.2% | 12.1% |
| Net income | $33.4B | −$2.7B | $30.4B | $59.2B | $77.7B | $135.3B |
| Operating cash flow | $46.3B | $46.8B | $84.9B | $115.9B | $139.5B | $161.4B |
| Capital spending | $61.1B | $63.6B | $52.7B | $83.0B | $131.8B | $173.0B |
| Free cash flow | −$14.7B | −$16.9B | $32.2B | $32.9B | $7.7B | −$11.6B |
Operating margin rose from 2% in 2022 to about 12% as AWS and ads grew faster than retail. Net income in the last twelve months includes the Anthropic gains. Capital spending has more than doubled since 2024, so free cash flow has fallen even as profit rose.
Amazon held about $114 billion of cash and marketable securities at the end of September against $173 billion of long-term debt, so net debt is now about $59 billion, up from roughly $10 billion in June. It pays no dividend and buys back little; every spare dollar goes into data centers, chips (Trainium) and the Leo satellite network. The Anthropic stake is a sizeable asset that is not included in this valuation, so it is upside to the numbers below; Anthropic’s planned IPO would give it a market price.
This update raises 2026 revenue to $828 billion and growth by a point a year, because AWS is growing faster with a larger backlog, and raises the investment path because 2027 spending will be higher. More net debt comes off the value. The changes roughly cancel out.
| Assumption | Base case | Basis |
|---|---|---|
| Revenue, 2026 | $828B | Three quarters plus the Q4 guidance midpoint |
| Growth, 2027 and 2028 | 13%, then 12% | AWS near 30% on its backlog, retail mid-to-high single digits |
| Growth after that | Fades to 3% by year 10 | A straight glide to long-run economic growth |
| Operating margin | 13% rising to 18% by 2031 | More AWS and advertising in the mix |
| Net investment | $170B, $130B, $90B, $60B, then $1 per $2 of new revenue | Spending rises in 2027, then the build peaks and normalises |
| Tax rate | 19% | Below the 21% federal rate after credits |
| Discount rate | 10.7% | Beta 1.33, 4.5% premium, about 6% debt |
| Terminal growth | 3.0% | With a 20% return on new capital |
| Bear | Base | Bull | |
|---|---|---|---|
| Growth, 2027 / 2028 | 8% / 7% | 13% / 12% | 16% / 15% |
| Long-run operating margin | 14% | 18% | 22% |
| Discount rate | 11.7% | 10.7% | 9.7% |
| Value per share | $66 | $155 | $279 |
| Probability | 25% | 50% | 25% |
Weighted 25/50/25: $164, up from $162.
| Discount rate | 8.5% | 9.0% | 9.5% | 10.0% |
|---|---|---|---|---|
| Value per share | $236 | $212 | $192 | $175 |
Every figure in this valuation comes from one model script, rerun and checked against this page each time the site is built. The XLSX model rebuilds it in live formulas: change any blue input and every year’s cash flow, the bridge to the value, the scenarios and the sensitivity table recalculate.
| To reach today’s price, you need | Instead of |
|---|---|
| A long-run operating margin near 26% | 18%; Amazon’s best quarter so far was 13.9% |
| Revenue growth of about 22% a year for two years | 13% and 12% |
| A discount rate of about 8.3% | 10.7% |
The market is betting that the $220 billion a year going into AI infrastructure, and more in 2027, earns AWS-like returns. The Anthropic stake, left out of the model, covers part of the gap.
| Risk | Why it matters |
|---|---|
| AI returns | If AI demand cools, Amazon is left with expensive capacity and falling AWS margins. |
| Cash flow and debt | Free cash flow is deeply negative and debt has more than doubled this year, leaving less room for error. |
| Regulation | The U.S. antitrust case against the store, and scrutiny of AWS in Europe. |
| Consumer slowdown | Retail and ads both depend on spending; advertising growth slowed to 11%. |
Upside: the $578 billion AWS backlog, Trainium chips cutting AWS costs and selling outside AWS from late 2027, Leo satellite internet starting service, and the value of the Anthropic stake.
AWS growth accelerated to 39% in the third quarter, but capital spending has turned free cash flow deeply negative and will rise again in 2027. The price assumes long-run margins higher than Amazon has ever earned.
What would change the value: The size of the 2027 capital spending plan, AWS growth staying near 40%, and operating income against the fourth-quarter guidance would move the value.
Ranges, not three cases. The expected value is the average of 4,000 runs of this report’s own model, with every input drawn from a range: the base case is the middle, and the bear and bull cases are the 10th and 90th percentiles. Business inputs move together; the discount rate moves on its own. The 25/50/25 weighting in the valuation section gives $164. How the ranges work
Two different questions. The rating is relative: it asks whether the stock is cheaper or dearer than the S&P 500 on the same assumptions. The absolute view asks whether it is worth its price at all: on its own the stock trades above our estimated value, which is 36% below the price.
On the same assumptions every report uses (a 5.15% Treasury yield and a 4.5% equity premium), the S&P 500 itself is worth about 68% of its price. The rating compares each stock with that: Buy if it is at least 15% cheaper than the market on this basis, Sell if at least 15% dearer, Hold in between. It is the same rule for every company, whoever owns it. The rating is the same whether the index is assumed to grow 6% or 10% a year. How ratings work
| Measure | Amazon | Industry median | Rank | |
|---|---|---|---|---|
| Revenue growth, last fiscal year | 12.4% | 5.2% | 9 of 47 | Better than the median |
| Operating margin | 12.1% | 15.0% | 30 of 45 | Worse than the median |
| Price to earnings | 19.4× | 19.0× | 24 of 46 | Worse than the median |
| Free cash flow yield | −0.4% | 4.5% | 46 of 47 | Worse than the median |
Peers: the 46 other S&P 500 companies in Consumer Discretionary with complete data (ABNB, APTV, AZO, BBY, BKNG, CCL, CMG, CVNA, DASH, DECK, DHI, DPZ, DRI, EBAY, EXPE, F, GM, GPC, GRMN, HAS, HD, HLT, LEN, LOW, LULU, LVS, MAR, MCD, MGM, NCLH, NKE, NVR, ORLY, PHM, RCL, RL, ROST, SBUX, TJX, TPR, TSCO, TSLA, ULTA, WSM, WYNN, YUM). Last twelve months where reported, from SEC filings; prices from the latest close. A lower price-to-earnings ratio ranks higher. These figures update with each data run; the rating does not.
The spending is a bet on AI that only pays off if AWS keeps its margins as it grows.
Defend this call: the hardest questions about this report, answered from it.
| What | Figures | Source |
|---|---|---|
| Latest results | $201.9B (Revenue, Q3 2026, +12%), +39% (AWS growth), $28.1B (Operating income, +61%), 39% (AWS operating margin) and others | Q3 2026 results, Amazon; Earnings call highlights; Market reaction |
| The numbers (five-year table) | Five years of annual figures and the last twelve months | SEC XBRL company facts; latest: 10-K for the period to 2025-12-31, 10-Q for the period to 2026-06-30 |
| Price at writing | $243.79 (Close, October 29, 2026, before the results) | Yahoo Finance; the time of the quote is stated beside the price |
| Discount rate inputs | 10-year Treasury 5.15%, equity risk premium 4.5% | Fixed for every report so they can be compared; How ratings work |
| Valuation | Every value, case and sensitivity | This site’s model: XLSX, CSV |
| Checked by hand | 13 figures on October 23, 2026 | All match; two figures clarified. Audit log |
| Input | Bear (10th percentile) | Base (median) | Bull (90th percentile) |
|---|---|---|---|
| Growth, first forecast year | 8.0% | 13.0% | 16.0% |
| Growth, second forecast year | 7.0% | 12.0% | 15.0% |
| Operating margin, near term | 12.0% | 13.0% | 14.0% |
| Operating margin, long run | 14.0% | 18.0% | 22.0% |
| Net investment, first years ($B) | 190/150/110/70 | 170/130/90/60 | 150/110/70/40 |
| Discount rate | 11.7% | 10.7% | 9.7% |
| Simulation result | |
|---|---|
| Expected value (average of 4,000 runs) | $157.13 |
| Likely range, 10th to 90th percentile | $88.63 to $233.37 |
| Median | $152.38 |
| Chance the value is above the price | 7% |
| Chance it is cheaper than the S&P 500 | 41% |
Each input is drawn from a split normal: its bear and bull values are the 10th and 90th percentiles, so the two sides can differ. Business inputs share a common factor (correlation 0.6); the discount rate moves on its own. Inputs not listed are held at their base value. How the simulation works.