Is Amazon Stock a Buy Right Now?

Shares of Amazon (NASDAQ: AMZN) slipped more than 3% on Friday. This builds on a pullback in the stock over the last week, which has left shares down more than 9% over the past 5 trading days.

The stock's slide, which comes along with a broader sell-off in chip stocks on Thursday and Friday, presents a timely question for investors: With the artificial intelligence (AI) spending boom showing no signs of cooling, is Amazon stock still a buy?

A strong case can be made for buying Amazon stock here. While the bull case still starts with its fast-growing cloud computing business, there are other reasons to get excited about Amazon's long-term potential as well. Alongside its cloud computing business, Amazon's advertising and retail profitability are also climbing.

But the case against the stock is just as visible: the spending needed to keep all of this going appears astronomical.

Image source: Getty Images.

AWS keeps accelerating

Amazon Web Services, the company's cloud computing arm and its largest source of profit, grew 28% year over year in the first quarter of 2026 to $37.6 billion. That was an acceleration from 24% in the fourth quarter of 2025 and 20% in the third.

"It is very unusual for a business to grow this fast on a base this large, and the last time we saw growth at this clip, AWS was roughly half the size," said Amazon CEO Andy Jassy during the company's first-quarter earnings call.

Much of the reacceleration can be traced back to AI.

Companies training and running AI models are renting enormous amounts of computing power, and Amazon is increasingly supplying it with chips of its own design rather than relying solely on Nvidia. Its custom silicon, including Graviton, Trainium, and Nitro, now generates more than $20 billion in annual revenue run rate and is growing at triple-digit percentages.

The demand behind those figures shows up in Amazon's commitments. The company recently expanded a cloud agreement with OpenAI, and AWS's remaining performance obligations (RPO) (contracts signed but not yet counted as revenue) have swelled to $364 billion.

The other catalysts -- and the cost

Two other parts of the business are quietly pulling more weight.

Amazon's advertising revenue rose 24% in the first quarter to $17.2 billion, a high-margin business that now trails only Alphabet and Meta in digital advertising. And the retail operation most shoppers picture when they think of Amazon is finally profitable in a way it rarely has been: North America operating income jumped to $8.3 billion from $5.8 billion a year earlier, as quicker delivery and a leaner warehouse network cut the cost of each order. Additionally, the number of items sold across its stores grew 15% year over year, the quickest pace since the pandemic-era surge.

Together, those gains lifted Amazon's operating margin to a record 13.1%. And operating income rose 30%.

The catch, however, is the cost. Amazon spent $44.2 billion on property and equipment in the first quarter alone, up from $25 billion a year earlier, and management expects roughly $200 billion in capital expenditures across 2026, much of it on data centers and AI chips. That outlay has nearly erased the company's free cash flow, which fell to about $1.2 billion over the past 12 months from close to $26 billion in the year-ago trailing-12-month period. Should AI demand keep building, the investments could pay off for years; should it cool first, that free cash flow could stay under pressure for a while.

So is Amazon stock a buy?

As of this writing, Amazon trades at about 32 times earnings. Though recent gains in Amazon's Anthropic investment flatter that figure; excluding the gains from its Anthropic investment, the valuation multiple sits closer to the mid-30s. That isn't cheap. But for a business growing operating profit 30% a year, with each of its major businesses speeding up at once, it doesn't seem unreasonable either.

For long-term investors comfortable with heavy spending and the stock price volatility that often accompanies it, Amazon stock could be a buy at today's price. The bigger risk isn't that businesses stop growing -- they clearly aren't -- but that the AI build-out proves costlier or slower to pay off than management expects. With that in mind, it may be wise to keep any position measured and to judge it over years rather than quarters.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.