As we head into 2026, Amazon (AMZN) appears to be presenting a compelling investment opportunity, having shown reliable long-term performance despite a lackluster showing in 2025, where its stock only gained 5%. This seemingly incongruous situation positions Amazon as a potentially undervalued asset in the eyes of investors.
The company has made notable advancements across several sectors including e-commerce, online advertising, cloud computing, and artificial intelligence—each being integral to fostering long-term growth. Analyzing Amazon’s recent financial results may shed light on why its stock price does not align with its robust business performance.
One significant element contributing to Amazon’s profit margins has been the impressive growth of its online advertising segment, which surged by 24% year-over-year in the third quarter to reach $17.7 billion. Although this revenue accounts for less than 10% of Amazon’s total earnings, it is a high-margin business that bolsters overall profitability. In this sector, Amazon is increasingly competing with well-established players such as Meta Platforms and Alphabet, both of which reported substantial ad revenues in the same period—$51.2 billion and $65.9 billion, respectively.
Furthermore, Amazon stands to benefit significantly from the ongoing advancements in artificial intelligence. CEO Andy Jassy reported that Amazon Web Services (AWS) has achieved a robust 20% year-over-year revenue growth, returning to the healthy expansion rates seen in 2022. The rise in AI’s popularity is driving more businesses toward AWS, as it provides the necessary infrastructure for developing AI capabilities.
Amazon is also leveraging its proprietary Trainium2 chips to enhance its cloud computing offerings. These chips aid in reducing costs, facilitating the company’s expansion in the AI sector, and are experiencing a remarkable demand surge, having increased by 150% sequentially and transforming into a multibillion-dollar venture.
The tech giant’s financials reveal an encouraging trajectory—AWS’s growth prospects, combined with its AI enhancements and booming advertising, indicate a resilient business model. In the third quarter, Amazon’s overall revenue grew by 13% year-over-year, while net income soared by 38%. These figures suggest a disconnection between the company’s stock performance and its underlying fundamentals, potentially setting the stage for a stock rally in 2026.
In conclusion, with a diversified growth strategy and significant investments in future technologies, Amazon appears poised for substantial long-term growth, making its stock an appealing proposition for investors looking to capitalize on its divergent performance and fundamentals in the marketplace.