Amazon's AI-Driven Cloud Comeback: Is AWS a Buy for the Long-Term?

In the high-stakes race to dominate AI infrastructure, Amazon Web Services (AWS) has long been the uncontested leader. But as Microsoft Azure and Google Cloud surge forward with aggressive investments, the question for investors becomes: Is AWS still a compelling long-term buy, or is its valuation catching up to a reality where its dominance is no longer unchallenged?

Valuation Re-Rating: A Tale of Two Metrics

AWS's financial performance in Q3 2025 paints a picture of resilience. The division reported $33 billion in revenue, a 20.2% year-over-year increase, and contributed $11.4 billion in operating income-a 10% rise compared to 2024, according to a WebProNews report. Amazon's trailing P/E ratio of 34.49, per Macrotrends' PE data, appears modest relative to its peers. Microsoft's FY25 Q3 release shows Microsoft's Intelligent Cloud segment, which includes Azure, posted a 40% revenue growth and a $13.4 billion operating income in the same period, while Google Cloud saw a 34% revenue jump and $3.6 billion in operating income in that release. Yet Microsoft's P/E ratio stands at 39, and Alphabet's at 30, suggesting investors are willing to pay a premium for Azure's faster growth.

This discrepancy hints at AWS's valuation re-rating potential. While Azure and Google Cloud are growing faster, AWS's broader ecosystem, mature tools like SageMaker and Bedrock, as highlighted in a Motley Fool analysis, and its 3.8 gigawatt power expansion position it to maintain profitability even as the market becomes more competitive. For AWS to see a re-rating, it must demonstrate that its slower growth is a trade-off for higher margins-a narrative that has historically justified its valuation.

Competitive Positioning: The AI Infrastructure Arms Race

AWS's competitive edge lies in its ability to scale. The company has doubled its power capacity since 2022 and plans to double it again by 2027, the Motley Fool piece notes, ensuring it can meet the insatiable demand for AI training and inference. This infrastructure advantage is critical as niche players like BigBear.ai and Palantir Technologies target verticals such as defense and government analytics. While these companies innovate in specialized areas, they rely on scalable infrastructure-AWS's core offering-to deploy their solutions.

However, Azure's 40% growth rate and Google Cloud's 34% suggest that AWS is no longer the only game in town. Microsoft's partnerships with AI startups and its integration of Azure with Microsoft 365 create a sticky ecosystem for enterprises. Google Cloud, meanwhile, is leveraging its AI research prowess to attract data-heavy clients. For AWS to retain its leadership, it must continue innovating in tools that reduce the complexity of AI development-such as its recent Bedrock updates-and maintain its first-mover advantage in global reach.

The Long-Term Outlook: Buy or Wait?

AWS's valuation re-rating hinges on two factors: its ability to sustain operating margins above 34% (its Q3 2025 margin, as reported by WebProNews) and its capacity to outpace Azure and Google Cloud in AI-specific offerings. The company's $3.8 gigawatt power expansion and partnerships with AI startups suggest it is prepared for the next phase of demand. However, investors should monitor Azure's aggressive pricing strategies and Google Cloud's AI R&D investments, which could erode AWS's margins.

For long-term investors, AWS remains a buy-if the company can balance growth with profitability. Its ecosystem, infrastructure scale, and first-mover advantage in AI tools provide a moat that rivals have yet to breach. Yet the narrowing valuation gap with Azure and Google Cloud means the window for a "cheap" entry may be closing.