As we dey look Amazon stock for 2026, many investors dey wonder if na correct time to buy. The stock dey trade around $248 as of now, and e get price-to-earnings ratio of about 35 times. For surface, dis one no look cheap at all, especially as Amazon dey inside one big spending cycle for artificial intelligence.
But make we look am well-well. Amazon Web Services (AWS) na di real game changer for dis matter. For di fourth-quarter earnings call, CEO Andy Jassy talk say AWS growth reach im fastest pace for 13 quarters. Customers dey rush AWS for core and AI workloads, and dem dey monetize capacity as fast as dem fit install am.
Wetin many pipo no know na say AWS account for just 18% of full-year sales but about 57% of operating income. Dis fast-growing business dey contribute well-well to company profits. Even more, di business dey supply constrained – meaning as long as Amazon fit build enough capacity, dia cloud computing business fit accelerate more.
For valuation matter, price-to-earnings ratio no be di best way to judge Amazon stock today. Instead, price-to-operating-cash-flow ratio of about 19 dey give better picture. Dis one dey measure company price relative to cash from operations before capital expenditures.
Amazon dey plan to spend about $200 billion on capital expenditures dis year. Dis big spending dey pressure earnings now and fit be even bigger drag for 2026 as depreciation expenses dey roll in over time. But if Amazon achieve attractive return on dis investments as management expect, investors go want make company spend heavy for dis AI boom.
For comparison sake, Amazon forward price-to-earnings ratio na 32. Dis one well above di 24 forward P/E wey e drop to last year, but e still dey at historically low level. Even more striking na di valuation gap between Amazon and im brick-and-mortar peers Walmart and Costco Wholesale.
Amazon don long trade at premium for retail space, but now e dey trade at big discount despite retail operations still growing revenue and profits more quickly. North American operating margin reach 9% for Q4, up from 8% last year. For Q4, Amazon see 24% jump for North American operating income on 10% increase for sales.
Dis operating leverage dey led by advancements for robotics and AI, wey dey make business more efficient. E dey also benefit from strong growth for high-gross-margin sponsor ad business. Amazon chip business get current revenue run rate of $20 billion, and e dey grow at triple-digit rates.
When dem include internal use, e dey closer to $50 billion business. Amazon use for internal operations help save on capital expenditure costs and inference expenses, wey help improve operating margins. Dis na underappreciated part of Amazon business wey dey grow quickly.
Not to forget, in addition to popular Trainium AI chips, company also get im own central processing units (CPUs), wey appear to be next AI bottleneck given rise of agentic AI. Amazon build huge facility for AI partner Anthropic wey go online for Q4, while company dey pour money into AI infrastructure to try keep up with demand for cloud services.
Market dey forward-looking and fit start pricing in earnings inflection over time if today investments continue to show signs of paying off, as dem do for Q4 when AWS revenue growth accelerate significantly. While investors no expect anything dramatic from Amazon stock over next year, 12% annual compounding from here look reasonable.
Using stock price of about $248 and reasonable 12% annual compounding rate, shares fit reach around $278 for one year. Over five years, dat same rate go put stock at $437. Of course, risks dey. Dis na just ballpark estimate. But e be fair expectation given significant acceleration for AWS revenue for Q4 and company broad-based business momentum.
Once-in-a-decade time to buy Amazon likely be during last year dip, but now still be great time to buy di stock. Amazon stock still historically and relatively cheap, while im cloud revenue growth dey accelerate and e dey see strong operating leverage for e-commerce operations.
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