Could the Market Be Selling Amazon Short?
Amazon. The very name conjures images of parcels, cloud servers, and voice assistants that never quite understand you. Yet behind the familiar brand lies a growth machine that's quietly retooling itself — and, in my view, being significantly underestimated by the market.
With a market cap tipping just over $2 trillion and a trailing P/E of 34, $Amazon.com(AMZN)$ might not scream ‘bargain bin’. But peel back the layers, and a much more compelling story emerges: a diversified tech juggernaut transitioning into its second golden age.
Amazon’s Future: A Brilliant Network Still Gaining Power and Speed
The Numbers Don't Lie – They're Whispering
Amazon closed recently at $186.54, well within a $151.61–$242.52 52-week range, suggesting the market still hasn’t made its mind up. Revenue over the trailing twelve months hit $637.96 billion — not exactly the growth profile of a company past its prime.
Perhaps even more telling is profitability. Amazon posted a robust 9.29% profit margin and $59.25 billion in net income, with levered free cash flow of $44.64 billion. Its forward P/E now stands at a more palatable 28.57, hinting that investors are paying up for future growth — but maybe not nearly enough.
Operating income surged in 2025’s first quarter to $15.3 billion, and free cash flow crossed the $50 billion mark for the trailing year. This is Amazon 2.0: leaner, meaner, and printing money at a pace Jeff Bezos might have once dreamt about while scribbling ideas on a napkin.
This surge in operating cash is more than a blip — it’s the beginning of a structural shift: see below.
Amazon's Free Cash Flow Is Soaring — and the Market May Just Be Catching On
AWS: Cloud King and Secret AI Sorcerer
AWS, the cloud arm that made Amazon’s first fortune, remains its reliable workhorse, growing 17% year-over-year. But there's a hidden twist many are missing. $Amazon.com(AMZN)$ isn’t trying to dazzle with shiny AI toys like some of its tech peers. Instead, AWS is quietly positioning itself as the infrastructure backbone for the AI boom.
Services like Bedrock and Trainium are attracting developers and enterprises that need horsepower, not headlines. In doing so, Amazon stands to grab a massive slice of the exploding AI infrastructure market without the circus act.
If AI is the next industrial revolution, AWS isn’t building the machines; it’s selling the bricks.
Advertising: Amazon's Hidden Goldmine
While AWS headlines have long hogged the spotlight, advertising is the dark horse surging up the inside track. Last quarter, Amazon’s advertising business grew 24%, hauling in a jaw-dropping $11.8 billion.
Even more impressively, ad margins are rumoured to hover north of 70%. That’s more lucrative than selling cloud space or streaming services — and makes YouTube’s ad business look almost quaint by comparison.
Few investors realise Amazon controls under 10% of the U.S. digital ad market. In a world where eyeballs and data are gold, Amazon’s vault is only getting deeper — and it’s still handing out free tours.
Logistics: From Burden to Boon
Remember when everyone mocked Amazon for its ballooning shipping costs? Who’s laughing now?
Amazon’s logistics empire — 110 million square feet and counting — now offers same-day delivery to nearly 80% of Americans. Better yet, Amazon Shipping has quietly started servicing third-party merchants. It’s the classic Amazon playbook: build it for themselves, then sell it to everyone else.
This transformation from cost centre to profit engine could deliver a significant margin boost that still isn’t fully reflected in analyst models. After all, delivering your neighbour’s package for a fee is much sweeter when you were driving past their house anyway.
International Expansion: The Slow Burn Ready to Ignite
International has long been Amazon’s Achilles’ heel — all potential, little profit. But that’s changing. Operating losses abroad are narrowing fast, and management forecasts breakeven (and beyond) within 18 months in key regions like Germany, Japan, and India.
Brazil’s business, growing at an eye-popping 37% annually, hints at just how much pent-up demand exists once the pieces fall into place. If international markets even modestly replicate North American profitability, the earnings uplift could be substantial — and largely unpriced.
Valuation: It's Not as Pricey as It Looks
Yes, a trailing P/E of 34 looks steep next to the broader market. But a forward P/E of 28.57 and a PEG ratio of just 1.42 tell a different story: investors are getting faster, higher-margin growth engines at a reasonable multiple.
Importantly, Amazon’s earnings mix is shifting away from capital-intensive retail and towards asset-light, high-margin businesses like advertising, logistics services, and AI-driven cloud solutions. That kind of repositioning doesn’t just drive earnings growth; it lowers risk over time.
The beta of 1.39 suggests $Amazon.com(AMZN)$ is still more volatile than the market, but given the upside potential, that feels more like ‘spicy’ than ‘dangerous’.
Amazon: Launching a New Era of Growth Beyond the Horizon
Conclusion: The Smart Money Is Looking Forward, Not Back
Is the market underestimating Amazon’s growth potential? In my view, absolutely. Too many investors still see Amazon through a rear-view mirror: an ageing retailer with a good cloud business. But today’s Amazon is an ad titan in the making, an AI arms dealer, a logistics kingpin, and a newly profitable international powerhouse.
Sure, regulatory clouds linger, and the macro backdrop isn’t all sunshine and rainbows. But patient investors willing to look through short-term noise could find themselves riding a second great Amazon wave — one built not on books and boxes, but on bits, bytes, and billion-dollar side businesses.
Sometimes the best investments aren't the newest — they're the ones quietly reinventing themselves right in front of us. Amazon looks ready to deliver once again.
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