Amazon (NASDAQ:AMZN | AMZN Price Prediction) briefly went below $200 after reporting Q4 2025 earnings. This means the stock has gained less than 20% in five years — something that drastically trails most of its peers. The selloff has calmed down, but it could continue as AMZN stock sheds its premium. It has also raised another question: Is the stock plateauing? The low returns may continue for years as Amazon is now the worst performer among the Magnificent Seven.
All of this happened despite Amazon posting 12% revenue growth and an acceleration in AWS revenue to 24% growth. In fact, AWS’s growth was the fastest in 13 quarters. AWS is the world’s largest cloud platform, though its growth turned anemic. Analysts have been predicting Microsoft‘s (NASDAQ:MSFT) Azure to take over as the biggest cloud computing unit, but the accelerating growth can keep Amazon in the lead.
Why Investors Are Still selling AMZN stock
Headline numbers all look pretty for Amazon, but the broader business shows that not everything is rosy. Amazon sees operating income “between $16.5 billion and $21.5 billion,” below analysts’ expectations of $22.2 billion.
The company disclosed plans to invest about $200 billion in 2026 capex, up from $131 billion in 2025, and the stock sold off after management’s Q1 operating income guide came in below expectations.
That’s very hard to swallow when you look at this business’ free cash flow figures. Amazon generated a bit less than $33 billion in free cash flow for all of 2025. And when you look at the balance sheet, you’ll realize that this is a business that is in net debt. Amazon reported $101.2 billion in cash and $130.9 billion in debt, so funding that $200 billion of expenditures is a stretch.
Operating cash flow growth is not keeping up.
Free cash flow has also been sinking quarter after quarter and is down over 75% in the past year.
Amazon Isn’t What It Was 3 Years Ago
While the company’s e-commerce sales still constitute the majority of its sales, AWS remains the most important component. It makes up ~60% of the company’s profits despite generating 17% of the sales. Investors are looking at data centers and AI as Amazon’s central theme, with the e-commerce business being less relevant today.
However, this does change things for how the stock is valued. Amazon was valued more holistically before, with multiple growing businesses. Now, with all eyes being on AWS alone, investors are comparing Amazon to other AI hyperscalers like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Microsoft. AMZN stock looks a lot less attractive at 29 times earnings when you can go buy GOOG stock for the same premium. MSFT stock trades at just 25 times earnings. Both of those businesses have grown faster, have a stronger software stack, and also have more room for growth due to their smaller data center businesses.
And historically, they’ve done better compared to AMZN stock.
Is AMZN Stock Plateauing?
Amazon is not the only stock that has been taking a hit. Most AI stocks have been going down in the past few weeks, specifically those linked to software. The S&P 500 Software & Services index is down 18% in the past month. Amazon is doing fine if you take the abysmal performance of the broader industry into account.
All that said, I do believe Amazon is poised to keep lagging in the coming quarters. The biggest problem has to do with growth. Investors want both growth and profits in the AI era, and Amazon realistically cannot provide both at the same time, as it lacks the muscular software arm that other big hyperscalers have.
Of course, its Amazon Web Services (AWS) is the largest cloud computing provider in the world, and the company is expanding its footprint in other markets like groceries. But for the way it’s spending on AI, it’s difficult to argue that those expenses can be sufficiently offset by other business segments.
Google has the search engine, YouTube and a host of other businesses. Microsoft has Windows, Office 365, and a gaming arm, bringing in billions in profits per year. They can handle AI capex just fine and survive if it does not work out.
Should You Buy Amazon Now?
Amazon’s e-commerce and AWS itself are the only sources it can rely on to fund capex.
If management wants to capture all the demand AWS can realistically have, they have to spend. My base case is that the market will still be displeased to see negative free cash flow and rising capex.
By the time these data centers come online and start generating profits, you’ll likely still be in the green, but you would’ve been better off if you put that money in NVIDIA (NASDAQ:NVDA), GOOG, or MSFT instead. Thus, I’d wait for AMZN stock to come down more before buying.
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