title: "Is Amazon (AMZN) a Good Long-Term Investment?" description: "Data-driven analysis of Amazon as a long-term investment. Covers AWS growth, retail margins, AI infrastructure, and valuation metrics." date: "2026-02-16" category: "Stock Analysis" tags: ["stock-analysis", "valuation", "Amazon", "AMZN", "cloud-computing", "e-commerce"] readingTime: 8 author: "Moatifi"

Is Amazon (AMZN) a Good Long-Term Investment?

Amazon is one of those rare companies that operates dominant businesses across multiple massive industries simultaneously. From e-commerce to cloud computing to advertising to AI infrastructure, Amazon's reach is extraordinary. But does that make it a good long-term investment at current prices? Let's examine the data. This analysis is for educational purposes only.

Amazon's Business in 2025-2026

Amazon's transformation over the past two years has been remarkable. After a difficult 2022 marked by over-hiring and margin compression, the company executed one of the most impressive operational turnarounds in big tech history.

Full-year 2024 revenue reached approximately $638 billion, up about 11% from $575 billion in 2023. More importantly, profitability surged: operating income roughly doubled from $36.9 billion in 2023 to approximately $68 billion in 2024.

What the Numbers Say

Revenue and Growth - 2024 revenue: ~$638 billion (up ~11% YoY) - AWS revenue (2024): ~$105 billion (up ~19% YoY) - Advertising revenue (2024): ~$56 billion (up ~20% YoY) - North America e-commerce: ~$388 billion - International e-commerce: ~$143 billion

Profitability - Operating income (2024): ~$68 billion (up ~84% YoY) - AWS operating margin: ~37% - North America operating margin: ~7% - Net income (2024): ~$59 billion - Free cash flow: ~$39 billion (after heavy capex) - Return on equity: ~22% - Return on invested capital: ~13%

Valuation Metrics - Market cap: ~$2.4 trillion - Trailing P/E: ~40x - Forward P/E: ~30-33x - Price-to-sales: ~3.7x - EV/EBITDA: ~22x - Price-to-free cash flow: ~60x (depressed by heavy AI capex)

Balance Sheet - Cash and equivalents: ~$78 billion - Total debt: ~$67 billion - Capital expenditures (2024): ~$75 billion (heavily weighted toward AI/cloud infrastructure)

The Competitive Moat

Amazon's moat is multi-layered and reinforcing, spanning several distinct business lines.

E-Commerce Scale and Logistics. Amazon's fulfillment network includes over 1,000 facilities globally, with same-day and next-day delivery reaching most of the US population. This logistics infrastructure represents tens of billions in invested capital that would take competitors years and enormous resources to replicate. Walmart is the only US competitor with comparable logistics capabilities in e-commerce.

AWS Cloud Dominance. Amazon Web Services holds approximately 31% of the global cloud infrastructure market, ahead of Microsoft Azure (~25%) and Google Cloud (~11%). AWS benefits from massive economies of scale, a broad service portfolio (200+ services), and deep enterprise relationships. Switching costs are substantial once workloads are deployed on AWS.

Prime Membership Flywheel. Over 200 million Prime members worldwide create a powerful flywheel: members spend roughly 2-3x more on Amazon than non-members. The combination of fast shipping, streaming video, music, and exclusive deals creates deep engagement and high retention rates above 90%.

Advertising Platform. Amazon's advertising business ($56 billion) is now larger than YouTube's ad revenue. The unique advantage: Amazon shows ads at the point of purchase, making them highly effective. This high-margin business leverages existing e-commerce traffic at minimal incremental cost.

Data and AI Infrastructure. Amazon's position in AI extends across custom chips (Trainium, Inferentia), managed AI services (Bedrock, SageMaker), and massive data center capacity. The company is investing $75+ billion annually in infrastructure, much of it AI-related.

The Bull Case

AWS growth is reaccelerating. After a period of optimization-driven slowdown, AWS growth has reaccelerated to nearly 20% as enterprises move from cost-cutting to new workload deployment, particularly AI. The AI infrastructure opportunity alone could double AWS revenue within 5 years.

Margin expansion has more runway. Amazon's operating margins have improved dramatically (from ~2% in 2022 to ~10.7% in 2024), but there is still room to grow. As the high-margin advertising and AWS segments become larger portions of total revenue, blended margins should continue expanding.

Advertising is a profit machine. The ads business generates estimated 50-60% operating margins and is growing 20%+ annually. At current trajectory, Amazon advertising alone could generate $30+ billion in annual operating income within a few years.

AI could be a multi-decade tailwind. As the leading cloud provider, Amazon is positioned to benefit enormously from enterprise AI adoption. Every company deploying AI models needs cloud infrastructure, and AWS is where many of those models will run.

Retail profitability inflection. Amazon's retail operations have shifted from margin-negative to solidly profitable. International operations are approaching profitability after years of investment. The combination of improved logistics efficiency, advertising monetization, and scale creates a sustainable margin structure.

The Bear Case

Valuation is not cheap. At ~40x trailing earnings and ~60x free cash flow, Amazon is priced for significant continued growth. The company needs to sustain high teens earnings growth for years to justify the current multiple. Apple generates more profit at a similar market cap with a lower P/E.

Massive capital expenditure requirements. Amazon is spending $75+ billion annually on capex, primarily for AI and cloud infrastructure. This depresses free cash flow and represents a significant bet that AI demand will materialize at scale. If AI spending disappoints, these investments become a drag on returns.

Cloud competition is real. Microsoft Azure is gaining market share, particularly among enterprises already in the Microsoft ecosystem. Google Cloud is growing faster than AWS from a smaller base. AWS market share has gradually declined from ~34% to ~31% over the past three years.

Regulatory risk. Amazon faces antitrust scrutiny globally. The FTC's ongoing antitrust case could result in operational restrictions on how Amazon competes with third-party sellers on its platform.

E-commerce is a low-margin grind. Despite improvements, retail e-commerce remains a structurally low-margin business. Amazon's North America retail operating margin of ~7% is good by retail standards but modest compared to asset-light tech businesses.

China and Temu threat. Ultra-low-cost platforms like Temu and Shein are gaining traction in the US, targeting price-sensitive consumers. While this threatens the low end of Amazon's marketplace more than Prime, it represents a competitive risk that did not exist a few years ago.

Putting It All Together

Amazon's long-term investment case rests on the convergence of multiple large, growing, and increasingly profitable businesses. AWS provides high-margin, recurring revenue; advertising is a profit engine; and retail, while lower-margin, generates massive cash flow at scale.

At ~30-33x forward earnings, Amazon's valuation requires continued execution across all segments. The key question is whether AI-driven demand will justify the massive infrastructure investments the company is making. If it does, Amazon's earnings power in 2028-2030 could be substantially higher than current estimates suggest, making today's price look reasonable in hindsight.

The risk is that AI spending normalizes before Amazon earns an adequate return on its capital investments, or that cloud competition erodes AWS margins.

For long-term investors willing to underwrite continued AI-driven cloud growth and margin expansion, Amazon offers a compelling combination of competitive moats and growth optionality. Whether it is a good investment at current prices depends on one's confidence in those assumptions and required rate of return.

Want the full analysis? See our complete AMZN moat analysis for a deep-dive into competitive advantages, 10-year financials, and intrinsic value estimate.