Amazon: It's Never Too Late To Buy

In the ever-shifting landscape of global commerce and technology, Amazon remains a paradox: a company that has grown from an online bookseller into a $2.166 trillion colossus, yet still faces skepticism about its valuation and long-term prospects. For investors willing to look beyond short-term volatility, however, the case for Amazon is compelling. The company's financial resilience, strategic dominance in cloud computing, and aggressive reinvestment in artificial intelligence (AI) infrastructure position it as a rare blend of stability and growth.

The Engine of Growth: AWS and AI-Driven Margins

Amazon Web Services (AWS) continues to be the crown jewel of the empire. In Q2 2025, AWS reported $30.9 billion in revenue, a 17.5% year-over-year increase, and contributed $10.2 billion in operating income—nearly one-third of Amazon's total operating profit for the quarterAmazon.com Announces Second Quarter Results^[1]. While its 18% growth rate lagged behind Microsoft Azure's 39% and Google Cloud's 32%, AWS's 32.9% operating margin in Q2 (despite a slight contraction from 39.5% in Q1 2025) underscores its profitability edgeCloud Market Share Q2 2025: Microsoft Dips, AWS Still Kingpin^[2].

The real story lies in AWS's AI investments. With $100 billion in 2025 capital expenditures—70% allocated to AI infrastructure—Amazon is betting big on the next frontier of cloud computingAmazon to spend $100B on AWS AI infrastructure^[3]. New EC2 instances powered by NVIDIA Grace Blackwell Superchips, coupled with custom silicon like Trainium and Inferentia, are positioning AWS to dominate generative AI workloadsAWS Q2 2025 earnings report Amazon cloud^[4]. As enterprises scramble to integrate AI into their operations, AWS's first-mover advantage in scalable, secure AI deployment could widen its margins further.

Valuation: A Discounted Premium

Amazon's valuation metrics suggest it is neither overpriced nor undervalued, but rather trading at a discount relative to its historical premiums and peers. Its current P/E ratio of 35.32 is 73% below its 10-year average of 131.62AMZN - Amazon Com PE ratio, current and historical analysis^[5], yet it remains above Alphabet's 25.64 and Microsoft's 37.39Microsoft (MSFT) Financial Ratios - Stock Analysis^[6]. This discrepancy reflects diverging investor sentiment: while Microsoft and Alphabet are seen as stable cash cows, Amazon is still perceived as a growth stock, albeit one with maturing segments.

The P/S ratio of 3.76, though higher than the 12-month average of 3.45, is justified by Amazon's expanding revenue base and AWS's high-margin contributionsAmazon.com (AMZN) PS Ratio^[7]. By comparison, Walmart's P/S ratio of 1.21 highlights the stark difference between retail and tech valuationsWalmart PE Ratio 2010-2025 | WMT - Macrotrends^[8]. For Amazon, the P/S ratio reflects not just e-commerce dominance but also the intangible value of AWS's enterprise client base and AI-driven advertising tools, which drove a 22-23% surge in ad revenue in Q2 2025Amazon.com, Inc. - Amazon.com Announces Second Quarter Results^[9].

Historical Resilience and Competitive Positioning

Amazon's 13% year-over-year revenue growth in Q2 2025—bringing total revenue to $167.7 billion—continues a 15-year trend of compounding at an average rate of 24.4% in its cloud segmentAmazon Revenue Trend 2010-2025: Growth Analysis^[10]. Even during the 2022 downturn, when AWS posted a $2.7 billion loss, the company's long-term vision prevailed, leading to a $39.8 billion operating profit in 2024AWS sees full-year profit and revenue growth as AI demand soars^[11]. This resilience stems from its dual-engine model: e-commerce, which still accounts for 82% of revenue, and AWS, which drives profitability.

In the cloud market, AWS's 30% share remains unmatched, though Microsoft's 20% and Google's 13% are closing the gapCloud Market Share in Q2 2025: Who Holds the Top Spot?^[12]. Yet AWS's profitability—32.9% operating margin versus Azure's 35% and Google Cloud's 28%—suggests it can sustain margins even as competition intensifiesAWS Q2 2025 revenue hits $30.9 bn as AI and cloud services drive growth^[13]. The key differentiator is AWS's AI infrastructure, which is already powering tools like Kiro (an agentic IDE) and Bedrock AgentCore, creating sticky, high-margin offeringsAmazon.com Announces Second Quarter Results^[14].

The Case for Long-Term Investors

Critics argue that Amazon's stock is expensive given its P/E and P/S ratios. But this overlooks the company's reinvestment strategy. With $100 billion in 2025 CAPEX—focused on AI data centers, custom silicon, and networking—Amazon is building the infrastructure to capture the next decade of digital transformationAmazon doubles down on AI with a massive $100B spending plan^[15]. For context, Microsoft and Alphabet are investing heavily in AI too, but Amazon's scale in cloud infrastructure gives it a unique advantage.

Moreover, Amazon's balance sheet is robust. Its debt-to-equity ratio of 0.44 is healthier than the industry average, and its $36.48 billion EBITDA dwarfs peers like Walmart ($11.88 billion) and JD.com ($11.88 billion)Performance Comparison: Amazon.com And Competitors In Broadline Retail Industry^[16]. As AI adoption accelerates, AWS's ability to monetize enterprise demand for large language models and generative AI could drive operating income to $40 billion annually, further justifying its valuation.

Conclusion: A Stock for the Patient

Amazon is not a flash-in-the-pan growth story—it is a mature company with a proven ability to reinvent itself. Its AWS division is a cash-generating machine, its e-commerce business remains a fortress, and its AI investments are laying the groundwork for the next phase of growth. At a P/E of 35.32 and a P/S of 3.76, it trades at a discount to its historical premiums and offers a compelling risk-rebalance for investors who can look beyond quarterly earnings.

As Andy Jassy noted, AWS is in the midst of a “once-in-a-lifetime opportunity” with AIAmazon.com, Inc. - Amazon.com Announces Second Quarter Results^[17]. For those willing to hold for the long term, Amazon's combination of resilience, innovation, and valuation discipline makes it a stock that is never too late to buy.