Every Amazon (AMZN) Investor Should Keep an Eye on This Number
Key Points
After two negative years, Amazon posted impressive outings with this metric in 2023 and 2024.
Investors will want to pay attention to how AI-related investments will impact the company’s financials.
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Amazon's (NASDAQ: AMZN) customer obsession has resulted in tremendous gains for investors.
In the past decade, shares skyrocketed 613% (as of Nov. 17). This business today is valued at a whopping $2.5 trillion. And it generated $691 billion in revenue in the past 12 months.
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Investors might think that they're focused on the right metrics when analyzing this dominant company. However, here's one number all shareholders should keep a close eye on.
Image source: Amazon.
This figure helps assess Amazon's true profits
A key indicator of a company's profitability is free cash flow (FCF), which is the money a business has remaining after operating expenses and capital expenditures. It's the cash left after what's used to run and grow a company.
Amazon reported negative FCF in 2021 and 2022. But things improved drastically after, with FCF totaling $36.8 billion in 2023 and $38.2 billion in 2024.
Artificial intelligence will continue to be a major use of cash
As are its peers, Amazon is spending aggressively on artificial intelligence (AI) efforts. It plans to spend $125 billion on capital expenditures just this year.
Wall Street consensus analyst estimates call for FCF to dip 45% year over year in 2025. Investors will want to see FCF return to growth sooner rather than later, as this might show that all the AI-related capital outlays are starting to bear fruit.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
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