Amazon Stock: Buy, Sell, or Hold?
Key Points
Amazon reports first-quarter results on April 29.
AWS growth accelerated in the fourth quarter.
The stock's recent run-up raises the bar for the upcoming report.
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Shares of Amazon (NASDAQ: AMZN) have come roaring back recently. The e-commerce and cloud computing giant is up about 14% year to date as of this writing, including a surge of nearly 25% over the last 30 days alone.
That move matters because Amazon reports its first-quarter results on Wednesday, April 29, after market close. With the stock now trading near its 52-week high, investors will be watching closely to see whether the company's growth story is strong enough to justify the recent rally.
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The business is clearly performing well. But has the stock already priced in Amazon's strong business momentum?
Image source: Motley Fool.
AWS is accelerating
Amazon's fourth-quarter results gave investors plenty to like. Net sales increased 14% year over year to $213.4 billion, and Amazon Web Services (AWS) sales rose 24% to $35.6 billion.
AWS grew 20% year over year in the third quarter, and the fourth quarter showed a meaningful step-up in growth for Amazon's most important profit engine. Indeed, Amazon's AWS revenue growth rate was its fastest in 13 quarters.
And investors shouldn't underestimate the importance of this momentum to Amazon's overall business. As a high-margin segment, AWS carries a disproportionate share of Amazon's earnings power. For the full year, AWS generated $45.6 billion in operating income on $128.7 billion in sales. Put another way, AWS accounted for only 18% of Amazon's full-year net sales but 57% of its operating income.
And management thinks AWS has a long runway as companies shift more workloads into the cloud and build artificial intelligence (AI) applications.
During Amazon's fourth-quarter earnings call, Amazon CEO Andy Jassy said, "We consistently see customers wanting to run their AI workloads where the rest of their applications and data are."
The spending plan is enormous
This opportunity, however, is expensive.
The company expects 2026 capital expenditures to total about $200 billion. Management said this spending will be driven by demand for existing offerings, AI, chips, robotics, and low-earth orbit satellites.
With that said, Jassy framed the spending as a direct response to demand. "We are monetizing capacity as fast as we can install it," he said during the call.
That may be true. But $200 billion is still a staggering number. For context, Amazon's free cash flow fell to $11.2 billion for the trailing 12 months ended Dec. 31, 2025, down from $38.2 billion in the prior-year period. Amazon said the decline was driven primarily by a $50.7 billion year-over-year increase in purchases of property and equipment, net of proceeds from sales and incentives, primarily reflecting investments in AI.
What to expect from Amazon's earnings report
Amazon's first-quarter guidance was solid, but not perfect.
Management guided for first-quarter net sales of $173.5 billion to $178.5 billion. At the midpoint of this guidance range, that would be about $176 billion in revenue, or about 13% growth.
But investments are apparently expected to weigh on profitability, as the company guided for only modest growth in operating income. The midpoint of the company's guidance for first-quarter operating income between $16.5 billion and $21.5 billion implies just 3.3% year-over-year growth.
Is Amazon stock a buy, sell, or hold?
Amazon's business looks strong. AWS is accelerating, advertising is growing rapidly, its online stores business is benefiting from faster delivery and operational improvements, and AI presents the company with a significant long-term opportunity.
But the stock has already rewarded investors for much of that optimism, with the stock now trading at a price-to-earnings ratio of 37.
With a valuation like this, I wouldn't buy the stock. But I also wouldn't sell it. Amazon has too many long-term advantages, and AWS could become an even larger profit engine as AI workloads scale.
Overall, I believe Amazon stock looks more like a hold than a buy today.
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Daniel Sparks and his clients have 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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