Meta Wants In on the Cloud. Is Amazon Stock Still a Buy?

Of all the companies with something to lose from this week's report that Meta Platforms (NASDAQ: META) wants to enter cloud computing, Amazon (NASDAQ: AMZN) would seem to top the list. Amazon Web Services (AWS) is the world's largest cloud provider, and it supplies the majority of Amazon's profits.

The report, from Bloomberg on Wednesday, said Meta is designing a cloud service that would rent out its artificial intelligence (AI) computing power and let customers use AI models running on its infrastructure -- a business that would compete with AWS, Microsoft Azure, and Alphabet's Google Cloud. Meta hasn't confirmed any of it, and the report noted the plans could still change.

But the market's reaction was telling. While Meta's stock jumped on the news, Amazon shares actually rose modestly on Wednesday, closing at $241.70. So how exposed is AWS, and is Amazon stock still a buy at about $242?

Image source: Getty Images.

Amazon's profit engine is accelerating

Whatever threat a Meta cloud may eventually pose, it's arriving at a moment when AWS has rarely looked stronger. In the first quarter of 2026, AWS revenue grew 28% year over year to $37.6 billion.

"AWS is growing 28% (our fastest growth in 15 quarters) on a very large base," said CEO Andy Jassy in the company's first-quarter earnings release. He also noted that Amazon's in-house chip business topped a $20 billion revenue run rate, growing at a triple-digit year-over-year rate.

AWS matters even more to profits than to sales. The segment produced $14.2 billion in operating income during the quarter -- nearly 60% of Amazon's $23.9 billion total -- despite accounting for only about a fifth of the company's $181.5 billion in net sales, which themselves grew 17% year over year.

And here's the detail that says the most about the state of cloud demand: Amazon's free cash flow for the trailing 12 months fell to just $1.2 billion, as purchases of property and equipment rose $59.3 billion year over year, primarily reflecting investments in AI. Amazon is effectively reinvesting everything it earns into new capacity. A company worried about a glut of AI computing wouldn't be racing to build more of it.

What a Meta cloud would -- and wouldn't -- threaten

Now consider what Meta is reportedly planning to sell: raw computing capacity, in the style of specialist providers such as CoreWeave (NASDAQ: CRWV), or access to AI models hosted on Meta's systems. Both target the newest, most commodity-like layer of the cloud market -- renting out computing power.

AWS's dominance rests on much more than that. Enterprises run their databases, applications, security, and analytics on AWS, often after multiyear migrations, and those workloads are notoriously difficult to move. Meta would be entering as a newcomer selling the one thing cloud customers can already buy from many vendors -- computing capacity -- without the deep catalog of software services, security tools, and enterprise relationships AWS has accumulated since 2006. Even in an optimistic scenario, a Meta cloud would likely spend years competing mainly with the specialist AI-capacity providers, not with the full-service platforms.

That doesn't mean Amazon investors can ignore the report. It signals that a massive new supply of AI computing could eventually come to market. If tech giants collectively overbuild, pricing power across the industry could weaken later this decade -- and Amazon's own heavy spending would look riskier in that world.

For now, though, the numbers favor the incumbent. Management guided for second-quarter net sales growth of 16% to 19%, suggesting momentum is holding. And at about $242 per share as of this writing, Amazon trades at about 32 times earnings -- though it's worth noting recent earnings got a boost from gains on the company's investments in AI firm Anthropic.

That's not a bargain multiple, but it's a reasonable one for a company compounding this quickly with its most profitable segment accelerating. Overall, I think Amazon stock remains a buy. A reported competitor with no announced product, no customers, and no enterprise track record isn't a reason to sell the company that defined the industry -- it's a reminder of how valuable the business Meta wants to copy has become.

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 Microsoft. The Motley Fool has a disclosure policy.