Two Reasons Keep Me Buying Amazon Without Fear Alex Sirois Tue, October 13, 2026 at 8:45 AM EDT 5 min read AMZN +0.86% MSFT +1.42% WMT +0.83% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
AWS accelerated to 37% growth with a $496 billion backlog, and Andy Jassy believes it could become a trillion-dollar annual revenue business.
AMZN trades at a lower book value multiple than MSFT (6.81 vs. 9.08) and runs nearly triple WMT's ~4% operating margin at 11%.
Amazon's $200 billion capex plan pushed free cash flow negative, but most AI capacity is already contracted for at least five-year terms.
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I keep adding to my Amazon (NASDAQ:AMZN) position, and every earnings report gives me another reason to buy more. My retirement account already holds plenty of income stocks. Amazon is the compounder I keep feeding because it owns two cash generators that keep getting stronger at once. Those two generators are why I buy without fear.
Cloud businesses this large usually slow down. AWS keeps speeding up. Growth rose from 20% in Q3 2025, to 24% in Q4 2025, to 28% in Q1 2026, and 37% in Q2 2026. Last quarter AWS revenue reached $42.23 billion at a 39.4% operating margin. CEO Andy Jassy said on the July call that "AWS is booming, growing 36.7% year-over-year in Q2".
The visibility gives me conviction. AWS carries a $496 billion backlog that is growing triple digits year over year. Its AI and chips businesses each passed $25 billion annualized run rates with triple-digit growth. Management said the "lion's share of capacity in 26" is largely reserved. Jassy now believes AWS could "very possibly be a trillion dollar annual revenue business for us in time".
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Amazon's second generators gets less attention than it deserves. Advertising grew 26% to $19.81 billion last quarter, and worldwide paid units rose 17%. Total revenue grew 19.6% to $200.61 billion, while operating income rose 43.24% to $27.46 billion. When operating income outpaces revenue, I know the higher-margin businesses are taking a larger share of the mix.
The balance sheet lets me sleep. Debt-to-equity sits at 0.37, interest coverage at 35.17x, and cash at $78.21 billion. I pay roughly 36 times earnings, and the stock has returned 530.72% over ten years.
The obvious cloud alternative is Microsoft (NASDAQ:MSFT), and Azure is excellent. I still prefer Amazon. Microsoft's book value multiple is 9.08, compared with Amazon's 6.81, and its More Personal Computing segment declined 4% in fiscal Q4. Amazon gives me cloud plus a growing ad and retail momentum.
Walmart (NASDAQ:WMT) lures retirees, but its dividend yields under 1% and its P/E of 41 runs higher than Amazon's. Walmart's operating margin sits near 4% against Amazon's 11.16%. I would rather own the higher-margin business at the lower multiple.
Amazon plans about $200 billion of capex in 2026. Q2 capex alone reached $54.21 billion, and trailing free cash flow turned negative at -$7.6 billion. Headline EPS also flatters the picture: Q2's $5.75 includes a $53.4 billion pre-tax Anthropic gain, with comparable EPS near $1.88. If AI demand cools before these data centers fill, returns will suffer.
My thesis holds up because of how this spending pays back. Management said data centers can be monetized for 30-plus years, servers break even in a little less than three years, and most AI capacity is contracted for at least five-year terms. Customers sign up before the concrete dries.
The capex is enormous, but it is going into the picks-and-shovels of the AI expansion, the power, cooling, and networking layer that gets less attention than the chipmakers (we covered seven of those suppliers in a free report here: 7 Stocks Powering the AI Boom (That Aren't Chipmakers)).
Q3 guidance calls for operating income of $22.5 billion to $26.5 billion, up from $17.4 billion a year earlier. Management says 85% of global IT spend is still on-premises, so the migration has decades left to run. Amazon is spending today to own the infrastructure the next 30 years will run on, and I want a bigger piece of it every quarter.
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