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Amazon
AWS earns 58% of Amazon’s operating profit on 20% of its sales, and the build behind it has pushed free cash flow below zero. The price needs AWS to compound about 28% a year for ten years; my base case is 18%, with depreciation pulling its margin from 38% to below 26%.
Updated Fiscal year ends 31 December31 min readPedrum Shokouhi
Strong moat
Research, not investment advice. Figures as of .
Key numbers
- Net sales$797.5B (reported)TTM Sep 2026; up 15% [39]
- Operating margin13.1% (reported)TTM Sep 2026 [39]
- AWS share of operating income58% (calculated)TTM Sep 2026, on 20% of net sales [39]
- Free cash flow−$42.4B (reported)TTM Sep 2026, Amazon's definition [39][40]
- Net capital spending$210.7B (reported)TTM Sep 2026, up 82% [39][40]
- Contracted backlog, mainly AWS$578.0B (reported)30 Sep 2026; 6.1-year weighted life [40]
(reported)Reported in a filing (calculated)Calculated from reported figures (estimate)My estimate
The answer
- At $243.79 in Q4 2026, Amazon trades 47% above my base value of $166 a share at a 10.5% discount rate and 24% below my $321 bull value, and 6% above my $231 base at the 9.0% rate I use for Microsoft.414440
- AWS earns 58% of the operating profit on 20% of the sales, and the depreciation on the $1,021B my base spends on it from here takes its operating margin from 37.8% to 25.5% by September 2030 while its sales nearly triple.4039
- With everything else at my base, the price needs AWS sales to compound 28.0% a year for ten years, against my 17.7%, and my margin of safety starts below $108; Q3 left my assumptions alone, and the values, taken at the 30 September balance sheet, are 1% higher rolled to Q4 2026.3941
- Jassy projects AWS growth of over 40% in both 2027 and 2028, and says AWS may reach a trillion dollars of sales in five to 10 years. My 17.7% a year for ten years sits far below that pace: my base has about 39% in calendar 2027, just under him, then about 31% in calendar 2028 and $822B in the year to September 2036. If he is right on sales and my margins and capital hold, my base is $176, and the price still needs 25.1% a year for the eight years after; at the 9.0% I use for Microsoft the same sales give $253, above the price.3948
Six questions, one line each
- Why
- AWS earns 58% of the operating profit on 20% of the sales, and the price asks it to grow about 28% a year for ten years.3941 →
- The moat
- Scale in cloud and delivery, and a marketplace that sellers and shoppers both use; AWS’s share of cloud infrastructure fell from 30% to 28% in the year to the June quarter, the latest Synergy count.392829 →
- The advantage
- AWS earned $17.8B in the September quarter against $11.1B at Google Cloud; Microsoft does not report Azure’s profit, and AWS trails both on growth.394647 →
- Management
- Andy Jassy has taken operating income from $24.9B to $104.4B since July 2021, and no pay formula tests the return on the build.39813 →
The business
Amazon sells goods and services to shoppers, advertising to the sellers and brands who want those shoppers, and computing to companies. In the twelve months to September 2026 net sales were $797.5B, up 15%, and operating income was $104.4B, a margin of 13.1%.39 From 2016 to 2025 net sales grew 20.3% a year and operating income 38.8% a year.211
Net sales and operating income
Fiscal years to 31 December, US$ billions
- Revenue $716.9B in 2025
- Operating income $80.0B
Show the numbers
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | TTM Sep 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue (reported) | $136.0B | $177.9B | $232.9B | $280.5B | $386.1B | $469.8B | $514.0B | $574.8B | $638.0B | $716.9B | $797.5B |
| Operating income (reported) | $4.2B | $4.1B | $12.4B | $14.5B | $22.9B | $24.9B | $12.2B | $36.9B | $68.6B | $80.0B | $104.4B |
The three reporting segments are three different businesses. AWS, 20% of net sales, earned a 37.8% operating margin and 58% of the company’s operating income. North America earned 8.2% and International 3.3%.39 I call the two retail segments together Stores. They hold the online and physical stores, third-party seller services, advertising and Prime. Amazon does not report the profit on any of those separately, and I do not invent it.2
Where the money comes from
TTM Sep 2026, US$ billions. Bar length is revenue; the share is of the segments' total.
- Segment revenue, TTM Sep 2026 $797.5B
- Segment operating income $104.4B
Show the numbers
| Segment | Revenue | Share | Operating income | Margin | Growth |
|---|---|---|---|---|---|
| North America (reported) | $460.3B | 57.7% | $37.6B | 8.2% | +11.0% |
| International (reported) | $175.8B | 22.0% | $5.8B | 3.3% | +13.7% |
| AWS (reported) | $161.4B | 20.2% | $61.0B | 37.8% | +32.4% |
Where the operating profit comes from
AWS against the two retail segments, calendar years and the four quarters to 30 September 2026.
| 2019 | 2022 | 2025 | TTM Sep 2026 | |
|---|---|---|---|---|
| AWS net sales | $35.0B | $80.1B | $128.7B | $161.4B |
| AWS operating income | $9.2B | $22.8B | $45.6B | $61.0B |
| AWS operating margin | 26.3% | 28.5% | 35.4% | 37.8% |
| North America and International net sales | $245.5B | $433.9B | $588.2B | $636.1B |
| North America and International operating income | $5.3B | −$10.6B | $34.4B | $43.3B |
| North America and International operating margin | 2.2% | −2.4% | 5.8% | 6.8% |
| AWS share of net sales | 12.5% | 15.6% | 18.0% | 20.2% |
| AWS share of operating income | 63% | 186% | 57% | 58% |
Shares are calculated from reported segment figures. Advertising, Prime and third-party fees are inside the retail segments and Amazon does not report their profit. Source 10-K FY2025; Q3 2026 release; 10-K FY2024; 10-K FY2021 [2][39][7][9]. Figures calculated from reported data.
How it makes money
- Online stores. $286.1B in the twelve months, up 2% in Q3 against a Q3 last year that held Prime Day. Amazon records these sales gross. (reported)39
- Third-party seller services. $187.7B, up 9% in Q3: commissions, fulfillment and shipping fees. Sellers account for 61% of paid units, which grew 12%. (reported)39
- AWS. $161.4B, up 39% in Q3 to a $184B annual run rate. (reported)39
- Advertising. $78.0B, up 11% in Q3 (12% excluding exchange rates), from sponsored ads, display and video. Its profit is not reported. (reported)39
- Subscriptions. $54.3B, up 11% in Q3: Prime fees and digital media. Amazon does not disclose how many members pay. (reported)39
- Physical stores and other. $23.1B for physical stores, up 2% in Q3, and $6.8B for the rest, which includes shipping services, healthcare and the co-branded card. (reported)3940
Prime Day fell in Q2 this year and in Q3 last year, which lifted the Q2 retail growth rates and held Q3 down.39 Amazon says Q3 growth would have been about four points higher without the shift.39
What changed after 2023
Amazon is spending several times what it spent three years ago. Net capital spending went from $48.1B in 2023 to $210.7B in the twelve months to September 2026, 26.4% of net sales. (calculated)239 AWS net property and equipment went from $110.7B at the end of 2024 to $313.0B at 30 September 2026. (calculated)240 Contracted revenue not yet recognized rose from $177B at the end of 2024 to $578B.740 Amazon held its guide for 2026 cash capital spending at about $220B, up from about $200B in the April shareholder letter, and the 10-Q says it expects cash capital expenditures to meaningfully increase in 2027.153940
AWS earns most of the profit, and the depreciation on what it will build sets the value.
The moat
I think Amazon has two moats of different types. The first is scale, in cloud infrastructure and in delivery. The second is a network effect in a marketplace that sellers and shoppers both use. The Stores margin has widened, but I have no share data to show that the Stores moat has. The AWS moat holds in profit and is narrowing in share.
Sellers account for 61% of paid units, and the fees they pay for commissions, fulfillment and shipping reached $187.7B in the twelve months.39 Advertising sells the shoppers’ attention back to those sellers and to brands: $78.0B, growing 11% in Q3 after 26% in Q2, both quarters bent by the Prime Day shift.394 The two retail segments together earned 0.9% of sales in 2016, 2.2% in 2019 and 5.8% in 2025, and 6.8% in the twelve months to September 2026, with a loss of 2.4% in 2022 in between. (calculated)291139 The margin rose as advertising grew from $12.6B in 2019 to $78.0B. I cannot tell how much of the gain is mix and how much is power over sellers, because Amazon does not report what advertising earns.2939
Operating margin: Stores against AWS
Operating income over net sales by year. Stores is North America plus International, with advertising, subscriptions and seller services inside it.
- Stores
- AWS
Show the numbers
| North America and International | AWS | |
|---|---|---|
| 2016 (calculated) | 0.9% | 25.4% |
| 2019 (calculated) | 2.2% | 26.3% |
| 2022 (calculated) | −2.4% | 28.5% |
| 2023 (calculated) | 2.5% | 27.1% |
| 2024 (calculated) | 5.4% | 37.0% |
| 2025 (calculated) | 5.8% | 35.4% |
| TTM Sep 2026 (calculated) | 6.8% | 37.8% |
Shipping costs are the exposure: they rose 11% to $28.3B in Q3 on net sales up 12%, after rising 19% in Q2 on net sales up 20%.394
The AWS moat is scale plus a cost position in chips. Synergy puts Amazon at 28% of cloud infrastructure services in the June 2026 quarter, ahead of Microsoft at 20% and Google at 15%, but Amazon held 30% a year earlier and Google 13%; Synergy’s September-quarter count was not out when I updated this page.2829 AWS still earns the most: $61.0B of operating income on $161.4B of sales over the twelve months, a 37.8% margin, up from 27.1% in 2023. (calculated)392 Its chips business, Graviton, Trainium and Nitro, passed a $25B annual run rate in the Q2 report, and 98% of the top 1,000 EC2 customers use Graviton.415 Jassy’s letter says that at scale he expects Trainium to save “tens of billions of capex dollars per year”; I cannot check that.15
Customers have committed to AWS for years ahead.
Contracted revenue not yet recognized
Mainly AWS; contracts longer than one year.
| Date or measure | Backlog | Weighted remaining life, or the basis |
|---|---|---|
| 31 Dec 2024 | $177B | 4.1 years |
| 30 Sep 2025 | $200B | 3.8 years |
| 31 Dec 2025 | $244B | 4.1 years |
| 31 Mar 2026 | $364B | 5.5 years |
| 30 Jun 2026 | $496B | 6.4 years |
| 30 Sep 2026 | $578B | 6.1 years |
| Average a year if recognized evenly over 6.1 years | $95B | Against $161B of AWS sales in the twelve months to September 2026 and $226B in my base’s first year |
| Two named expansions (at least $200B), share of the $334B rise since 31 December 2025 | 60% | If both are inside the $578B; the 10-Q gives the quarter each was announced, not when it was booked |
Commitments in customer contracts with original terms over one year, primarily AWS. The last two rows are calculated: $578B over 6.1 years, and $200B over $334B (OpenAI's $100B was announced in Q1 2026 and Anthropic's more than $100B in Q2 2026). Recognition will not be even, because the capacity arrives over time. Source 10-K FY2024; 10-Q Q3 2025; 10-K FY2025; 10-Q Q1 2026; 10-Q Q2 2026; 10-Q Q3 2026 [7][6][2][5][3][40]. Figures as reported.
The 10-Q names two expansions: OpenAI’s $100B over eight years, on top of $38B, announced in Q1 2026, and Anthropic’s more than $100B over ten, announced in Q2.40 Amazon holds stakes in both companies. It has paid $18.0B in cash for Anthropic, $8.0B of convertible notes and $10.0B of preferred stock, and carries the stake at $238.7B; it has funded the whole $50B commitment to OpenAI, $21.3B of it in Q3. (calculated)4016 Amazon has also agreed to make up to $15.0B more available for Anthropic to draw as AWS reaches compute delivery milestones, as convertible notes or, after an IPO, common stock bought for cash.40 The 10-Q does not say whether the expansions sit inside the $578B, or give any customer’s share. If they do, two customers that Amazon funds hold about 35% of the backlog, and 60% of the $334B added since December 2025 if both were booked when announced. (calculated) Amazon books their commitments as backlog and its stakes at funding-round marks, so the marks lift net income without adding cash, and the backlog is only as good as the customers’ own funding.40 The backlog also covers a minority of near-term sales: spread evenly over its 6.1-year weighted life, $578B is about $95B a year, against $161B of AWS sales in the twelve months and $226B in my base’s first year. (calculated)
The returns show what the build costs. Each dollar of property AWS added from 2018 to 2021 earned about 36 cents a year after tax. From 2022 to 2025 it earned 14 cents, and from 2023 to September 2026, 12 cents. (calculated)2378940 Capacity under construction earns nothing yet, so the latest windows understate what finished capacity will earn. My cost of capital is 10.5%. AWS sales per dollar of net property fell from $1.25 at the end of 2023 to $0.52 in the twelve months to September 2026. (calculated)2344039
Return on the property AWS added
Change in AWS operating income over the window, taxed at 21%, divided by the change in AWS net property and equipment. Windows of three years; the last is 33 months to September 2026.
- Reported windows
- To September 2026
Show the numbers
| After tax | |
|---|---|
| 2018 to 2021 (calculated) | 36% |
| 2019 to 2022 (calculated) | 29% |
| 2020 to 2023 (calculated) | 22% |
| 2021 to 2024 (calculated) | 25% |
| 2022 to 2025 (calculated) | 14% |
| 2023 to Sep 2026 (calculated) | 12% |
AWS net sales per $1 of AWS net property and equipment
AWS net sales in the year divided by AWS net property and equipment at the year end; the last bar is the twelve months to September 2026 over the 30 September 2026 balance.
- Reported years
- Twelve months to September 2026
Show the numbers
| Sales per $1 of property | |
|---|---|
| 2019 (calculated) | $1.49 |
| 2021 (calculated) | $1.44 |
| 2023 (calculated) | $1.25 |
| 2024 (calculated) | $0.97 |
| 2025 (calculated) | $0.68 |
| TTM Sep 2026 (calculated) | $0.52 |
Amazon’s own account of the economics is payback:
on average, it takes a little less than three years to break even
I turn that into a number. At my 57% margin before depreciation, payback in 2.7 to 3.0 years means $0.58 to $0.65 of annual sales per $1 of server cost, or $0.35 to $0.39 per $1 of all AWS capital if servers are 60% of it and the data center shells earn nothing on their own. (estimate) My model counts capital net of the year’s depreciation: my base starts at $0.45 and reaches $0.70 per $1 of net new capital. On the gross basis of the payback arithmetic, my base’s first year brings $0.35 of added AWS sales per $1 spent. (estimate)1532
| Evidence | Earlier | Latest | Direction |
|---|---|---|---|
| Stores operating margin (calculated)21139 | 0.9% (2016) | 6.8% (TTM Sep 2026) | Margin up; share not measured |
| Advertising sales (reported)939 | $12.6B (2019) | $78.0B (TTM); up 11% in Q3 | Growing |
| Third-party share of paid units (reported)39 | 62% (Q3 2025) | 61% (Q3 2026) | Slightly down |
| Share of cloud infrastructure, Synergy, whole points (reported)2829 | 30% (Q2 2025) | 28% (Q2 2026) | Narrowing |
| AWS operating margin (calculated)239 | 27.1% (2023) | 37.8% (TTM); 38.7% (Q3) | Up |
| After-tax return on AWS property added over three years (calculated)2789 | 36% (2018 to 2021) | 14% (2022 to 2025) | Falling |
| AWS sales per $1 of net property (calculated)24039 | $1.25 (2023) | $0.52 (TTM Sep 2026) | Falling |
| Contracted backlog and weighted life (reported)740 | $177B, 4.1 years (Dec 2024) | $578B, 6.1 years (Sep 2026) | Growing; two customers may be about a third |
The Stores margin has risen from 0.9% to 6.8% in ten years; the AWS margin now has to carry the depreciation on the $313B it holds and on the $1,021B my base adds.
The competitive advantage
Amazon’s advantage over Alphabet is profit at scale. AWS earned $17.8B of operating income in the September quarter on $46.0B of sales, a 38.7% margin, or 38.5% without a $0.09B energy-contract gain. Google Cloud earned $11.1B on $30.7B, 36.2%, and AWS’s sales are 1.5 times Google Cloud’s. (calculated)3946 Against Microsoft I cannot measure it. Microsoft does not report Azure’s profit, and from the September quarter it no longer reports Intelligent Cloud either; Azure now sits inside a broader Agents and Infra segment.47 Stores earned $43.3B of operating income in the twelve months, 42% of the company’s total, and helps pay for the AWS build. (calculated)39
The three cloud segments, September 2026 quarter
Segment figures only. Azure is Microsoft's cloud revenue on its fiscal 2027 definition; Microsoft reports no cloud-only profit.
| AWS | Azure | Google Cloud | |
|---|---|---|---|
| Cloud sales (reported) | $46.0B | $33.2B | $30.7B |
| Growth from a year earlier (reported) | 39% | 48% | 103% |
| Operating income (reported) | $17.8B ($17.7B without the energy gain) | not disclosed | $11.1B |
| Operating margin (calculated) | 38.7% (38.5% without the energy gain) | not disclosed | 36.2% |
| Share of cloud infrastructure, Q2 2025 and Q2 2026 (Synergy) (reported) | 30%, 28% | 20%, 20% | 13%, 15% |
The energy gain is $0.09B of net unrealized gains on energy contracts in Q3 that the 10-Q says primarily affect AWS; removing it gives the lower figures. Microsoft's new Agents and Infra segment reported $76.8B of revenue and $40.6B of operating income in the quarter and mixes Azure with other products, so it does not stand in for Azure. Synergy had not published September-quarter shares when I updated this page. Source Q3 2026 release; Alphabet Q3 2026; Microsoft Q1 FY27 release; Synergy Q2 2026; Synergy Q2 2025 [39][46][47][28][29]. Figures as reported.
Company-wide cash, trailing year
Whole companies, not cloud segments: Amazon includes Stores; Microsoft is the four quarters to 30 September 2026; Alphabet includes Search and YouTube.
| Amazon | Microsoft | Alphabet | |
|---|---|---|---|
| Cash capital spending, September quarter (reported) | $75.9B | $39.4B | $51.4B |
| Operating cash flow, trailing year (reported) | $168.3B | $195.9B | $179.6B |
| Cash capital spending, trailing year (reported) | $210.7B | $135.9B | $159.8B |
| Free cash flow, trailing year (calculated) | −$42.4B | $60.0B | $19.7B |
Amazon's capital spending is net of proceeds and incentives; gross purchases of property in the September quarter were $77.3B. Microsoft takes datacenters on finance leases, $24.6B in its fiscal 2026 (I did not update this figure for the September quarter), where Amazon mostly uses operating leases, $27.2B of assets in the twelve months, which never appear as capital spending. Source 10-Q Q3 2026; Q3 2026 release; Alphabet Q3 2026; Microsoft 10-K FY2026; Microsoft Q1 FY27 release [40][39][46][36][47]. Figures as reported.
Where Amazon leads
AWS keeps 39 cents of each sales dollar as operating income, 38 cents without the energy gain, and Google Cloud keeps 36 cents. (calculated)3946 In chips, OpenAI agreed in February 2026 to consume 2 gigawatts of Trainium capacity, and Anthropic’s expanded commitment includes obligations tied to AWS chips.163 Advertising grew 11% in Q3 and Amazon expects growth in the high teens in Q4; its profit is not reported.3940
Where it trails
AWS grew 39% in the September quarter, Azure 48% and Google Cloud 103%. Google’s figure includes Workspace and sales of TPU systems, the chips Alphabet designs, so it overstates the gap in cloud infrastructure, but the shares tell the same story as of the June quarter, the latest Synergy count: Amazon’s moved from 30% to 28% and Google’s from 13% to 15%.3946472829 The 10-Q notes that pricing changes on long-term customer contracts partly offset AWS usage growth.40
Amazon is the only one of the three companies with negative trailing free cash flow, and it has covered the gap with debt: $130.0B of long-term debt raised in the twelve months, $48.1B of it in Q3, which took long-term debt from $65.6B at the end of 2025 to $173.1B. The $17.5B term loan was drawn in September, and the sterling notes closed that month. Alphabet sold $49.6B of common and mandatory convertible preferred stock in June; Microsoft’s free cash flow was $60.0B.394018193047
Against retailers
Against other retailers Amazon earns a higher margin at a similar scale, on different mixes. Stores earned 6.8% on $636.1B in the twelve months to September 2026, with advertising and subscriptions inside it. Walmart earned 4.2% on $713.2B in the year to 31 January 2026, as a company-wide figure. (calculated)3931 The periods differ. The 10-K lists physical, e-commerce and omnichannel retailers, search engines and virtual assistants, logistics providers, and cloud and AI infrastructure companies among its competitors.2 Amazon does not disclose its share of online retail and I have no sourced estimate, so I do not judge share in retail.
Management
Andy Jassy has been chief executive since July 2021. He founded and led AWS from 2006, as its chief executive from April 2016, and joined Amazon in 1997.213 Jeff Bezos founded the company in 1994, was chief executive until July 2021, and is Executive Chair. He held 8.8% of the shares in February 2026, worth $231.7B at the close. (calculated)213 Brian Olsavsky has been chief financial officer since June 2015, Matt Garman has run AWS since June 2024, and Doug Herrington has run Worldwide Stores since July 2022.2 Under Jassy net sales rose from $469.8B in 2021 to $797.5B in the twelve months to September 2026, operating income from $24.9B to $104.4B, and AWS operating income from $18.5B to $61.0B.839 The twelve months carry charges and benefits that net to $1.1B of charges, described under Financials.
The stock returned 39%, 6.4% a year, from 2 July 2021, the last close before he became chief executive, to Q4 2026, against 91%, 12.9% a year, for the S&P 500 including dividends. Over ten years it returned 528%, 20.2% a year, against 328%, 15.7% a year. (calculated)43 The stock trailed the index over his tenure and beat it over ten years.
The board is led by Bezos as Executive Chair and Jamie Gorelick as lead independent director. Nine of the eleven 2026 nominees are independent; the other two are Bezos and Jassy. (calculated) A shareholder proposal for a mandatory independent chair was on the 2026 ballot and the board opposed it. Kevin Mandia, a cybersecurity executive, joined the board on 8 September 2026.1320
Who runs it
Executive officers and the largest holder, from the 2026 proxy and the FY2025 10-K.
| Name | Role | In the role since | Shares owned, 24 Feb 2026 | Pay, 2025 |
|---|---|---|---|---|
| Andy Jassy | President and CEO | July 2021 | 2,313,536 | $2.07M |
| Jeff Bezos | Executive Chair; founder | Chair since 1994; Executive Chair since July 2021 | 950,434,581 (8.8%) | $1.68M |
| Brian Olsavsky | Chief financial officer | June 2015 | 86,097 | $0.37M |
| Matt Garman | CEO, AWS | June 2024 | 10,293 | $0.62M |
| Doug Herrington | CEO, Worldwide Stores | July 2022 | 528,960 | $0.43M |
| David Zapolsky | Chief Global Affairs and Legal Officer | February 2025 | 41,190 | $0.37M |
Pay is the Summary Compensation Table total. No stock was awarded in 2025. Jassy's total on the 2021 table was $212.7M, almost all of it the restricted stock award made when he became CEO; he has had none since. Source 10-K FY2025; Proxy 2026 [2][13]. Figures as reported.
Bezos’s holding fell 7.0% between the 2025 and 2026 proxies, by 71.3 million shares. His Forms 4 show he sold 25.0 million shares from 27 June to 24 July 2025 for about $5.65B, under a trading plan adopted on 4 March 2025, and gave 2.5 million shares to non-profit organizations. The proxies show 43.8 million fewer shares over which he has voting power and no investment power. The three add to the full 71.3 million. (calculated)131438 He sold a further 1.2 million shares on 3 August 2026 at about $286.38
Capital allocation
The deal record is mixed, and the largest gain so far is an investment, at Amazon’s own marks.
| Deal | Closed | Price | Latest figure |
|---|---|---|---|
| Whole Foods Market12 | August 2017 | $13.2B | 550-plus stores and 100 more planned, per management15 |
| MGM Holdings8 | March 2022 | $6.1B, plus $2.5B of debt repaid | At purchase: $3.4B of video content and $4.9B of goodwill; not reported separately since |
| One Medical8 | February 2023 | $3.5B | At purchase: $1.3B of intangibles and $2.5B of goodwill; not reported separately since |
| iRobot8 | Terminated January 2024 | About $1.7B | Not completed |
| Anthropic40 | From Q3 2023 | $18.0B in cash | Carried at $238.7B, Amazon’s own mark |
| OpenAI4016 | From Q1 2026 | $50.0B by 30 September, of $50B | Carried at cost; fully funded |
| Globalstar173 | Expected in 2027 | About $10.9B with debt | Not completed |
On Amazon’s own marks, $18.0B of cash bought a stake worth $238.7B. Marks are not cash: in 2021 Amazon booked an $11.8B gain on Rivian and in 2022 a $12.7B loss.4098 The recorded value of the Anthropic, OpenAI and other stakes, $298.8B, is 11.3% of the market value. (calculated)40
Stakes in two AWS customers: cash paid against Amazon's mark
Carrying value at 30 September 2026 against cash invested, USD billions. Anthropic's cash invested is the $8.0B of notes plus $10.0B of preferred stock; OpenAI is carried at cost.
- Carrying value
- Cash invested
Show the numbers
| Carrying value | Cash invested | |
|---|---|---|
| Anthropic (reported) | $238.7B | $18.0B |
| OpenAI, funded by 30 September (reported) | $50.0B | $50.0B |
| All other holdings (calculated) | $10.1B |
From 2016 to 2025 Amazon produced $604.3B of operating cash flow, spent $443.7B net on property and equipment and $126.6B on stock pay, and paid $6.0B for its own shares. (calculated)2811 It has paid no dividend. The share count rose 12.5%. (calculated) The one buyback, in 2022, took 46.2 million shares for $6.0B, about $130 a share; the stock is 88% above that price. $6.1B of the authorization remains and nothing has been bought since. (calculated)840 Long-term debt rose from $65.6B at the end of 2025 to $173.1B at 30 September 2026, and interest expense was $1.7B in Q3 against $0.5B a year earlier.240 Amazon drew the $17.5B term loan in September.4018
Incentives
Jassy’s pay was $2.07M in 2025, of which the salary was $365,000. There is no cash bonus. His last equity award, in 2021, was $212.7M on that year’s table, and he has had none since. He holds 2.31 million shares, $564.0M at the close, or 272 times his 2025 pay. (calculated)13 Restricted stock vests over time and no executive’s pay has a performance condition, severance or supplemental pension.13 That aligns him with the share price and with nothing else. No measure of return on capital or free cash flow appears, in years when Amazon is spending $211B a year net. Shareholders backed 2026 pay with 94% of the votes for or against, against 78% in 2025. (calculated)3513 Pay does follow the stock: compensation actually paid, which marks unvested stock to market, was $13.2M for 2025 and negative $147.7M for 2022. A hundred dollars of Amazon stock at the end of 2020 was worth $142 at the end of 2025, against $197 for the NYSE technology index and $155 for the S&P retail index.13 I rate his operating record high. I cannot rate the Anthropic gain: it is unrealized. Nothing in pay or reporting tests the return on the build.
From 2016 to 2025 stock pay was $126.6B and buybacks $6.0B, with no dividend, and the share count still rose 12.5%. (calculated)2811 Jassy’s stock vests with time, so it pays him for the share price and size, not for cash returned. Bezos, the largest holder at 8.8%, sold about $5.65B of shares in 2025 and 1.2 million more in August 2026.131438
Financials
Operating income rose 25 times from 2016 to the twelve months to September 2026. Owner free cash flow summed to −$29.4B over 2016 to 2025. Both are true because Amazon puts back more than it earns. (calculated)239
I define owner free cash flow as operating cash flow less net cash capital spending, less property acquired under finance leases, less stock pay, as on the Microsoft page. Amazon’s own free cash flow leaves out the last two and, since the FY2025 10-K, shows one measure instead of three. Operating leases never count as capital spending: their rent sits in operating cash flow, $27.2B of operating-lease assets were acquired in the twelve months, and another $164.9B of leases are signed but not started.240397
From operating cash flow to owner free cash flow, by year
Calendar years and the four quarters to 30 September 2026, USD billions.
| 2019 | 2021 | 2023 | 2025 | TTM Sep 2026 | |
|---|---|---|---|---|---|
| Operating cash flow (reported) | $38.5B | $46.3B | $84.9B | $139.5B | $168.3B |
| Less net cash capital spending (calculated) | $12.7B | $55.4B | $48.1B | $128.3B | $210.7B |
| Free cash flow, Amazon’s definition (calculated) | $25.8B | −$9.1B | $36.8B | $11.2B | −$42.4B |
| Less property acquired under finance leases (reported) | $13.7B | $7.1B | $0.6B | $2.9B | $4.5B |
| Less stock pay (reported) | $6.9B | $12.8B | $24.0B | $19.5B | $19.9B |
| Owner free cash flow (calculated) | $5.2B | −$28.9B | $12.1B | −$11.2B | −$66.8B |
| Operating income (reported) | $14.5B | $24.9B | $36.9B | $80.0B | $104.4B |
| Net new property, owned or finance-leased, share of after-tax operating profit (calculated) | 98% | 201% | 64% | 141% | 196% |
Owner free cash flow is operating cash flow less net cash capital spending, less property acquired under finance leases, less stock pay. Net new property is net cash capital spending plus finance-lease additions, less depreciation of property and equipment, over operating income taxed at 21%. Depreciation for 2019 and 2021 is from the 10-K notes ($15.1B and $22.9B). Source 10-K FY2025; Q3 2026 release; 10-K FY2024; 10-K FY2021; 10-K FY2020 [2][39][7][9][10]. Figures calculated from reported data.
In the twelve months to September 2026 Amazon added net property worth 196% of its after-tax operating profit. In 2023 it was 64%, and in 2019, before the build, 98% with about half of it leased. (calculated)239910
Free cash flow
Fiscal years to 31 December, US$ billions
- Free cash flow $11.2B in 2025
Show the numbers
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | TTM Sep 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Operating cash flow (reported) | $17.2B | $18.4B | $30.7B | $38.5B | $66.1B | $46.3B | $46.8B | $84.9B | $115.9B | $139.5B | $168.3B |
| Free cash flow (calculated) | $10.5B | $8.3B | $19.4B | $25.8B | $31.0B | −$9.1B | −$11.6B | $36.8B | $38.2B | $11.2B | −$42.4B |
| Capital spending (calculated) | $6.7B | $10.1B | $11.3B | $12.7B | $35.0B | $55.4B | $58.3B | $48.1B | $77.7B | $128.3B | $210.7B |
From operating cash flow to owner free cash flow
Amazon's definition against a fuller count, USD billions.
| FY2025 | TTM Sep 2026 | |
|---|---|---|
| Operating cash flow | $139.5B | $168.3B |
| Less purchases of property and equipment | −$131.8B | −$215.2B |
| Plus proceeds from sales and incentives | $3.5B | $4.5B |
| Free cash flow, Amazon’s definition | $11.2B | −$42.4B |
| Less property and equipment acquired under finance leases | −$2.9B | −$4.5B |
| Less stock-based compensation | −$19.5B | −$19.9B |
| Owner free cash flow | −$11.2B | −$66.8B |
| Memo: principal repaid on finance leases and financing obligations | $1.9B | $2.0B |
| Memo: increase in property and equipment bought but not yet paid | $10.2B | $26.8B |
| Memo: cash paid for income taxes | $8.3B | $6.8B |
| Memo: tax at 21% on pre-tax income excluding other income (estimate) | $17.2B | $22.0B |
| Memo: deferred income taxes added back in operating cash flow, including tax on investment gains | $11.5B | $36.3B |
| Memo: operating-lease assets acquired (never counted as capital spending) | $19.9B | $27.2B |
Owner free cash flow follows the Microsoft page: operating cash flow less net cash capital spending, less assets taken on finance leases, less stock-based compensation. Net income carries the investment gains and the tax on them, and the cash flow statement takes both out, so the gains do not lift operating cash flow. Cash taxes are low for three reasons: 100% accelerated depreciation on qualified property and immediate expensing of domestic research costs under the 2025 Tax Act, and IRS Notice 2026-7, which the 10-Q says applies retroactively to 2025 and lowers 2024 and 2025 cash taxes. Source 10-K FY2025; Q3 2026 release; 10-Q Q3 2026 [2][39][40]. Figures calculated from reported data.
The twelve months to September 2026 are not a clean base. They carry about $2.4B of charges, the settlements, severance and impairments of Q4 2025; the $2.5B FTC settlement and $1.8B of severance of Q3 2025 have left the window. They also carry about $1.3B of benefits: $0.64B of tariff refunds in Q2 and $0.69B of net gains on energy contracts over the first nine months, $0.09B of it in Q3. Net, operating income is $1.1B higher on a clean basis, $105.4B against the $104.4B reported. (calculated)240396 In Q3, AWS earned a 38.7% operating margin as reported and 38.5% without the energy gain, and a margin before depreciation of 58.7% as reported and 58.5% without it. (calculated)4039
Margins
Fiscal years to 31 December, share of revenue
- Net sales less cost of sales 50.3%
- Operating 11.2%
- Free cash flow 1.6%
Show the numbers
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | TTM Sep 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Net sales less cost of sales margin (calculated) | 35.1% | 37.1% | 40.2% | 41.0% | 39.6% | 42.0% | 43.8% | 47.0% | 48.9% | 50.3% | 51.4% |
| Operating margin (calculated) | 3.1% | 2.3% | 5.3% | 5.2% | 5.9% | 5.3% | 2.4% | 6.4% | 10.8% | 11.2% | 13.1% |
| Free cash flow margin (calculated) | 7.7% | 4.7% | 8.3% | 9.2% | 8.0% | −1.9% | −2.3% | 6.4% | 6.0% | 1.6% | −5.3% |
Operating margin rose from 3.1% in 2016 to 11.2% in 2025 and 13.1% in the twelve months to September 2026. Net sales less cost of sales, which is not a gross profit because Amazon reports none, rose from 35.1% to 51.4% of net sales as AWS and advertising grew. (calculated)23911 Technology and infrastructure expense, called technology and content before 2023, rose from 11.8% of net sales in 2016 to 15.9% in the twelve months, which is the build in the income statement. (calculated)23911
Operating margin has risen with scale, and depreciation is now cutting into it. On the capital in my base case, AWS depreciation rises from 19.3% of AWS sales in the twelve months to September 2026 to 22.3% in the year to September 2027, 29.1% in the year to September 2029 and 31.5% in the year to September 2030. (estimate) Of the $144.5B of AWS depreciation in the year to September 2030, about $37B is on the property AWS holds today and about $107B on the $1,021B my base adds in four years. (estimate) To hold its 37.8% margin, AWS would need a margin before depreciation of about 69% in 2030; I assume 57%, below the 58.5% of Q3 without the energy gain. (estimate)4039
AWS depreciation as a share of AWS net sales
Depreciation and amortization of property and equipment allocated to AWS, reported to the twelve months to September 2026, then my base case.
- Reported
- My base case
Show the numbers
| Share of sales | |
|---|---|
| 2023 (calculated) | 13.8% |
| 2024 (calculated) | 12.4% |
| 2025 (calculated) | 16.7% |
| TTM Sep 2026 (calculated) | 19.3% |
| Year to Sep 2027, my base (estimate) | 22.3% |
| Year to Sep 2028, my base (estimate) | 26.2% |
| Year to Sep 2030, my base (estimate) | 31.5% |
| Year to Sep 2033, my base (estimate) | 29.3% |
| Year to Sep 2036, my base (estimate) | 25.1% |
Accounting to watch
- Asset lives. Amazon has changed server lives four times in six years: from three to four years in January 2020, from four to five (and networking from five to six) in January 2022, from five to six in January 2024, and back to five for a subset in January 2025. The 2024 change cut depreciation by $3.2B and added $2.5B to net income, mainly in AWS; the 2025 reversal added $1.4B of depreciation.10972 From January 2025 Amazon also lengthened heavy-equipment lives from ten to thirteen years, which it estimated would add about $0.9B to 2025 operating income, mainly in Stores. In Q4 2024 it booked about $920M of accelerated depreciation on servers it chose to retire early, and expected about $0.6B more in 2025.7 Jassy says servers have a useful life of at least five to six years.32 In my model a 4.5-year life for AWS’s short-lived assets lowers the base value to $155 and a 4.0-year life to $150; a 6.5-year life raises it to $175. The short-lived share matters as much: at 50% of AWS capital my base is $188, and at 70% it is $139. My 9-year life for Stores equipment is shorter than the 10 to 13 years Amazon uses. (estimate)
- Cash timing. Property bought but not yet paid rose $26.8B in the twelve months, so cash capital spending of $210.7B ran behind $237.4B incurred, and free cash flow on that basis was about −$69.1B. (calculated)4039 Operating cash flow of $168.3B includes $36.3B of deferred income taxes and $13.3B from higher payables. The investment gains do not lift it: net income carries them and the tax on them, and the cash flow statement takes both out. Cash taxes were $6.8B against about $22.0B of tax at 21% on pre-tax income excluding other income. (estimate) Three things cut them: 100% accelerated depreciation on qualified property and immediate expensing of domestic research costs under the 2025 Tax Act, and IRS Notice 2026-7, which the 10-Q says applies retroactively to 2025 and lowers 2024 and 2025 cash taxes; the 10-Q does not size it. The depreciation deduction reverses if capital spending slows.403932
- Investment gains. GAAP net income of $134.8B includes $69.5B of pre-tax other income, 40% of pre-tax income, mostly marks on Anthropic. Without it, earnings per share were about $7.59 against the reported $12.37. The price is 32.1 times the first and 19.7 times the second. (estimate)3940 Another $140.3B of unrealized gain on the Anthropic notes sits in other comprehensive income. The FY2026 consensus mean of $8.00 sits below the $10.42 earned in the first nine months, so it cannot include the gains.4045397
Strategic investments on the balance sheet
Carrying values at 30 September 2026, USD billions.
| Holding | Cash invested | Carrying value |
|---|---|---|
| Anthropic convertible notes | $8.0B (to Q4 2025) | $146.2B |
| Anthropic nonvoting preferred stock | $10.0B in Q2 2026, plus notes converted | $92.5B |
| OpenAI Series C preferred stock | $50.0B by 30 Sep, fully funded | $50.0B |
| All equity, warrant and convertible investments | $298.8B |
Level 3 fair values from Amazon's own marks. Gains of $62.8B on Anthropic preferred stock went through other income in the first nine months of 2026, the same total as the first half, so Q3 added none. Source 10-Q Q3 2026 [40]. Figures as reported.
Amazon, ten years
Calendar years. TTM is the four quarters to 30 September 2026.
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | TTM Sep 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Net sales (reported) | $136.0B | $177.9B | $232.9B | $280.5B | $386.1B | $469.8B | $514.0B | $574.8B | $638.0B | $716.9B | $797.5B |
| Revenue growth (calculated) | – | 30.8% | 30.9% | 20.5% | 37.6% | 21.7% | 9.4% | 11.8% | 11.0% | 12.4% | – |
| Net sales less cost of sales (calculated) | $47.7B | $65.9B | $93.7B | $115.0B | $152.8B | $197.5B | $225.2B | $270.0B | $311.7B | $360.5B | $409.7B |
| Net sales less cost of sales, margin (calculated) | 35.1% | 37.1% | 40.2% | 41.0% | 39.6% | 42.0% | 43.8% | 47.0% | 48.9% | 50.3% | 51.4% |
| Operating income (reported) | $4.2B | $4.1B | $12.4B | $14.5B | $22.9B | $24.9B | $12.2B | $36.9B | $68.6B | $80.0B | $104.4B |
| Operating margin (calculated) | 3.1% | 2.3% | 5.3% | 5.2% | 5.9% | 5.3% | 2.4% | 6.4% | 10.8% | 11.2% | 13.1% |
| AWS operating income (reported) | $3.1B | $4.3B | $7.3B | $9.2B | $13.5B | $18.5B | $22.8B | $24.6B | $39.8B | $45.6B | $61.0B |
| North America operating income (reported) | $2.4B | $2.8B | $7.3B | $7.0B | $8.7B | $7.3B | −$2.8B | $14.9B | $25.0B | $29.6B | $37.6B |
| International operating income (reported) | −$1.3B | −$3.1B | −$2.1B | −$1.7B | $0.72B | −$0.92B | −$7.7B | −$2.7B | $3.8B | $4.8B | $5.8B |
| Other income (expense), net, below operating income (reported) | $0.09B | $0.35B | −$0.18B | $0.20B | $2.4B | $14.6B | −$16.8B | $0.94B | −$2.2B | $15.2B | $69.5B |
| Net income (reported) | $2.4B | $3.0B | $10.1B | $11.6B | $21.3B | $33.4B | −$2.7B | $30.4B | $59.2B | $77.7B | $134.8B |
| Diluted EPS, split-adjusted (calculated) | $0.24 | $0.31 | $1.01 | $1.15 | $2.09 | $3.24 | −$0.27 | $2.90 | $5.53 | $7.17 | $12.37 |
| Operating cash flow (reported) | $17.2B | $18.4B | $30.7B | $38.5B | $66.1B | $46.3B | $46.8B | $84.9B | $115.9B | $139.5B | $168.3B |
| Purchases of property and equipment, net of proceeds and incentives (calculated) | $6.7B | $10.1B | $11.3B | $12.7B | $35.0B | $55.4B | $58.3B | $48.1B | $77.7B | $128.3B | $210.7B |
| Free cash flow (Amazon definition) (calculated) | $10.5B | $8.3B | $19.4B | $25.8B | $31.0B | −$9.1B | −$11.6B | $36.8B | $38.2B | $11.2B | −$42.4B |
| Free cash flow margin (calculated) | 7.7% | 4.7% | 8.3% | 9.2% | 8.0% | −1.9% | −2.3% | 6.4% | 6.0% | 1.6% | −5.3% |
| Owner free cash flow (calculated) | $1.8B | −$5.5B | $3.4B | $5.2B | $10.2B | −$28.9B | −$31.9B | $12.1B | $15.4B | −$11.2B | −$66.8B |
| Stock-based compensation (reported) | $3.0B | $4.2B | $5.4B | $6.9B | $9.2B | $12.8B | $19.6B | $24.0B | $22.0B | $19.5B | $19.9B |
| Diluted shares, split-adjusted (calculated) | 9.68B | 9.86B | 10.0B | 10.1B | 10.2B | 10.3B | 10.2B | 10.5B | 10.7B | 10.8B | 10.9B |
(reported)Reported in a filing (calculated)Calculated from reported figures (estimate)My estimate
Source 10-K FY2025; 10-K FY2024; 10-K FY2023; 10-K FY2021; 10-K FY2020; 10-K FY2018; Q3 2026 release; SEC companyfacts; 10-Q Q3 2026 [2][7][8][9][10][11][39][1][40]. Lines marked C are calculated from the reported lines above them.
Valuation
First, how this goes badly wrong
I asked what would most likely hurt an owner, and worked back. Three things can. The build outruns demand: net capital spending was $210.7B in a year, and at least $238B of the $578B backlog comes from OpenAI and Anthropic, both funded by Amazon.40 The new capital earns too little: AWS has added $0.29 of sales per dollar of property since the end of 2023, and depreciation then lands on slower sales. (calculated)239 Or the fixed charges stay when the revenue does not: debt and leases come to $610.2B, 5.8 times operating income. (calculated)4039
What an owner can take out is far below what is reported. Net income for the twelve months to September 2026 was $134.8B, with $69.5B of pre-tax income mostly marks on Anthropic. Operating cash flow less net capital spending, finance leases and $19.9B of stock pay left −$66.8B. That is $201.6B apart. (calculated)3940
Amazon does not say how much spending only keeps AWS in place, so I cannot know what it earns standing still. I show a range. If new AWS capital never earns more than today’s $0.45 of sales per dollar, my base is $120, not $166. (estimate) The lab stakes are $78.1B at cost or $245.8B at Amazon’s mark, and I cannot judge which is closer.40
What the price implies
Run my model backwards and change only the growth of AWS. The price then needs AWS sales to grow 28.0% a year for ten years, to about $1.89 trillion in the year to September 2036, against 17.7% and $822B in my base. (calculated) AWS grew 29.9% a year from 2016 to 2025, from $12.2B. It now starts from $161.4B, 13 times larger, and capital spending has risen from 5% of Amazon’s net sales in 2016 to 26%. (calculated)23911
What the price assumes about AWS
AWS net sales growth a year, years 1 to 10, that today's price needs in my base model, next to the last nine years and my cases.
Show the numbers
| Rate | |
|---|---|
| What the price implies (calculated) | 28.0% |
| AWS growth a year, 2016 to 2025 (calculated) | 29.9% |
| AWS growth, twelve months to September 2026 (reported) | 32.4% |
| Price implies, AWS margin held at today's (calculated) | 22.6% |
| My bull case (profit near consensus for three years) (estimate) | 21.0% |
| My base case (estimate) | 17.7% |
Reverse DCF: the inputs
Solve my base model for today's price by changing one thing, the growth of AWS, and read off the rate.
| Starting net sales | $797.5B, twelve months to September 2026: AWS $161.4B, Stores $636.1B |
|---|---|
| Stores | my base path: growth 11% fading to 5%, operating margin 6.2% rising to 9.9% |
| AWS margin before depreciation | 57% (57.1% in the twelve months to September 2026; 58.5% in Q3 without a $0.09B energy gain, 58.7% as reported) |
| New AWS sales per $1 of new AWS capital | my base path: $0.45 rising to $0.70 |
| Discount rate | 10.5% |
| Growth after year 15 | 3.0% |
| Net debt, finance leases and obligations | $90.3B (30 September 2026) |
| Stakes in Anthropic, OpenAI and others, after tax | $245.8B (mark $298.8B) |
| Shares | 10.813B |
| Price | $243.79 (Q4 2026); values taken at the 30 September 2026 balance sheet |
| What the price implies (calculated) | 28.0% |
Source 10-K FY2025; 10-Q Q3 2026; Q3 2026 release; Yahoo Finance quote [2][40][39][41]. Inputs from the filings and my model; the implied rate is calculated.
The price needs AWS to grow about 28% a year for ten years, to about $1.89 trillion, on my margins and capital needs.
If AWS kept its 37.8% operating margin every year instead of paying for the depreciation the capital brings, my base would be worth $192, $26 more, and the price would still need AWS to grow 22.6% a year, to about $1.24 trillion. (calculated)4039
What the price pays for
Market value and multiples at $243.79.
| Measure | Value | Basis |
|---|---|---|
| Market value (calculated) | $2,636B | 10.813B shares on the 10-Q cover |
| Price to twelve-month earnings excluding the investment gains (estimate) | 32.1 times | About $7.59 a share: pre-tax income less $69.5B of other income, taxed at 21% |
| Price to reported twelve-month earnings (calculated) | 19.7 times | $12.37 a share, which includes the Anthropic gains |
| Price to 2027 consensus earnings (estimate) | 22.9 times | $10.65, mean of 17 estimates, read hours after the Q3 report |
| Earnings yield on earnings excluding the gains (calculated) | 3.1% | Against a 4.98% ten-year Treasury |
| Free cash flow yield (calculated) | −1.61%; −2.53% | Amazon’s definition; mine, after finance leases and stock pay |
| Discount rate at which my base equals the price (calculated) | 8.8% | 3.8 points over the Treasury |
Estimate labels mark figures that rest on my adjustment or on consensus. Source 10-Q Q3 2026; Q3 2026 release; Treasury yields; Nasdaq consensus EPS [40][39][44][45]. Figures calculated from reported data.
What it takes to reach the price
What it takes to reach the price, one input at a time
Each row changes one input of my base case and leaves the rest.
| Change one input in my base case | Base case | Needed |
|---|---|---|
| AWS growth a year, years 1 to 10 | 17.7% | 28.0% |
| Stores growth a year, years 1 to 10 | 7.4% | 20.0% |
| AWS margin before depreciation, every year | 57.0% | 71% (14 points higher) |
| Stores margin before depreciation, every year | 9.8% rising to 13.5% | 8.5 points higher |
| New AWS sales per $1 of new AWS capital | $0.45 rising to $0.70 | About 1.7 times that: $0.75 to $1.17 |
| Discount rate | 10.5% | 8.8% |
Base-case inputs are my estimates; each needed value comes from solving my model for the price with every other input unchanged. Source 10-Q Q3 2026; Q3 2026 release; Yahoo Finance quote [40][39][41]. Figures calculated from reported data.
Capital and margins matter as much as growth. Swapping one bull input group at a time into my base adds $55 for capital needs, $40 for margins, $17 for growth and $5 for growth after year 15. (estimate) Growth adds least because, at my base capital needs, extra growth consumes cash almost as fast as it earns. Taken together, in the order the chart shows, the groups reach my bull case at $321.4039
From my base value to my bull value
Each bar swaps one more bull input group into my base case, in this order. Per share, discounted at 10.5%, stakes after tax in every bar.
- My base
- Adding bull inputs
- Items outside the cases
Show the numbers
| Value per share | |
|---|---|
| My base case (estimate) | $166 |
| + bull margins (estimate) | $206 |
| + bull capital needs (estimate) | $262 |
| + bull growth (estimate) | $309 |
| + bull growth after year 15 = my bull case (estimate) | $321 |
| The price, Q4 2026 (reported) | $243.79 |
| Base with the stakes at cost (estimate) | $150 |
| Base without the stakes (estimate) | $143 |
The capital lever rests on one ratio, the AWS sales each new dollar of capital brings, and it is the least evidenced input in the model.
AWS sales per $1 of new capital: what has been observed, and what my base is worth at each level
Net new capital is the change in AWS net property and equipment. The last column holds the ratio fixed for all ten years in my base case.
| Ratio of added AWS sales to added net property | Where it comes from | My base held at that ratio |
|---|---|---|
| $0.29 (calculated) | Observed, end 2023 to September 2026: $70.6B of sales added over $240.3B of property added, with no lag, counting capacity not yet in service | −$7 |
| $0.45 (estimate) | My base in year one | $120 |
| $0.56 (calculated) | Observed with a one-year lag: 2025 sales added over 2024 net property added. The same measure was $1.61 to $2.36 in 2017 to 2021, before AI data centers | $168 |
| $0.45 rising to $0.70 (estimate) | My base, which averages $0.57 | $166 |
Management's payback of just under three years gives $0.35 to $0.39 per $1 of all AWS capital before depreciation, which is about $0.35 for my base's first year on the same basis. Bear case: $0.30 rising to $0.50. Bull case: $0.60 rising to $0.95. Source 10-K FY2025; 10-Q Q3 2026; Q3 2026 release; 10-K FY2024; 10-K FY2023; 10-K FY2021; 10-K FY2020; 10-K FY2018 [2][40][39][7][8][9][10][11]. Figures calculated from reported data.
From the end of 2023 to September 2026 AWS added $70.6B of sales on $240.3B of added net property, $0.29 per dollar, and that counts capacity not yet in service. (calculated)240398 Measured with a one-year lag, as the model does, 2025 sales added per dollar of 2024 net property added were $0.56, against $1.61 to $2.36 a year in 2017 to 2021, before AI data centers. (calculated)2397891011 That ratio differs from the $0.52 of total sales per dollar of the whole property stock in the moat section. My base averages $0.57 and is worth about the same as holding $0.56 every year. I expect the ratio to rise from $0.45 for three reasons: data center shells, 40% of AWS capital in my model, are built once and filled by successive generations of servers; Amazon is putting its own chips into the next generation; and the backlog turns on capacity already under construction. (estimate)1532 This is the largest single lever between my base and the bull case, $55 a share, and the bear case holds the ratio at $0.30 for three years.
What the price pays for Stores
What the price pays for Stores gives the same answer from the other side. I value AWS at multiples of its twelve-month after-tax operating profit, at a 21% tax rate, and read off what is left for Stores. (estimate) The enterprise value is the market value plus $90.3B of net debt less $245.8B of stakes after tax, $2,481B. (calculated)4039
What the price pays for Stores
AWS valued at a multiple of its twelve-month after-tax operating profit; Stores is what is left of the operating enterprise value.
| AWS multiple of after-tax profit ($48.2B) | Value of AWS | Left for Stores | Times Stores' $34.2B |
|---|---|---|---|
| 20 times | $964B | $1,517B | 44.3 |
| 25 times | $1,205B | $1,275B | 37.2 |
| 30 times | $1,446B | $1,034B | 30.2 |
Operating enterprise value $2,481B: market value $2,636B plus net debt $90.3B less $245.8B of stakes after tax. Profit is taxed at 21%. The multiples are my illustration, not a view. Source 10-Q Q3 2026; Q3 2026 release; Yahoo Finance quote [40][39][41]. Judgements are my estimates.
At the middle row the price pays 37.2 times Stores’ twelve-month after-tax profit. (calculated) Twelve-month AWS profit is a poor guide because AWS is growing: on my base year-one profit of $62.0B for AWS and $34.5B for Stores, the enterprise value is 25.7 times the total. (calculated)4039
Bear, base and bull
The model runs fifteen years, the years to September 2027 through September 2041: ten explicit years, then five in which each engine’s growth fades in a straight line to the terminal rate. The table under How the model works lists the choices.
Three cases
Fifteen-year model of free cash flow for two engines, AWS and Stores (North America and International, with advertising, subscriptions and seller services inside Stores), for the years to September 2027 through September 2041. Each engine's operating margin is a margin before depreciation less depreciation built from the capital its growth needs, and the cash flows are discounted at 10.5%. Net debt is deducted. The stakes in Anthropic, OpenAI and others are added after tax at Amazon's own marks in the base and bull cases, and at cost in the bear case. Values are taken at the 30 September 2026 balance sheet, the last one filed; rolled to Q4 2026 they are about 1% higher (bear $57, base $167, bull $323). Per-share values divide by the 10.813B shares on the 10-Q cover; counting the 223M unvested stock awards (11.034B in all) lowers each value by 2.0%, to $163 for the base.
| Bear | Base | Bull | |
|---|---|---|---|
| AWS growth, year to September 2027 (estimate) | 27% | 40% | 43% |
| AWS growth, year to September 2028 (estimate) | 17% | 33% | 37% |
| AWS growth a year, years 1 to 10 (estimate) | 8.2% | 17.7% | 21.0% |
| AWS net sales, year to September 2036 (estimate) | $354B | $822B | $1,089B |
| Stores growth a year, years 1 to 10 (estimate) | 4.7% | 7.4% | 8.7% |
| Stores net sales, year to September 2036 (estimate) | $1,011B | $1,295B | $1,465B |
| Net sales growth a year, years 1 to 10 (estimate) | 5.5% | 10.3% | 12.3% |
| AWS margin before depreciation, years 1 to 10 (estimate) | 55.0% to 52.0% | 57.0% | 58.5% to 61.5% |
| AWS depreciation, share of AWS sales, year to September 2030 (estimate) | 36.2% | 31.5% | 25.8% |
| AWS operating margin, years 1 / 4 / 10 (estimate) | 31.9% / 17.7% / 23.6% | 34.7% / 25.5% / 31.9% | 37.5% / 33.7% / 42.2% |
| Stores operating margin, years 1 / 10 (estimate) | 6.0% / 6.2% | 6.2% / 9.9% | 7.4% / 12.2% |
| New AWS sales per $1 of new AWS capital, years 1 to 10 (estimate) | $0.30 to $0.50 | $0.45 to $0.70 | $0.60 to $0.95 |
| After-tax return on AWS net property at year end, years 1 / 4 / 10 (estimate) | 12% / 6% / 8% | 13% / 10% / 14% | 15% / 16% / 24% |
| Capital spending incurred, year to September 2027 (estimate) | $201B | $266B | $245B |
| Free cash flow, years 1 / 4 / 10 (estimate) | −$44B / $22B / $81B | −$93B / −$23B / $216B | −$59B / $28B / $399B |
| Growth after year 15 (estimate) | 2.5% | 3.0% | 3.5% |
| Stakes in Anthropic, OpenAI and others (estimate) | At cost, $78.1B | At the after-tax mark, $245.8B | At the after-tax mark, $245.8B |
| Value after year 15, share of the total (estimate) | 56% | 68% | 60% |
| Value per share (estimate) | $57 | $166 | $321 |
| Versus the price, Q4 2026 (calculated) | −77% | −32% | +32% |
Source 10-K FY2025; 10-Q Q3 2026; Q3 2026 release; Yahoo Finance quote; Yahoo Finance monthly; Treasury yields; Damodaran ERP; Nasdaq consensus EPS [2][40][39][41][24][44][26][45]. Assumptions and values are my estimates.
What it is worth, against the price
Value per share in US dollars. My bear, base and bull cases against the closing price in Q4 2026.
- Bear to bull range
- Base case $166
- Price, Q4 2026 close $243.79
- Margin-of-safety zone below $108
Show the numbers
| Per share | Against the price | |
|---|---|---|
| Bear case (estimate) | $57 | 77% below price |
| Base case (estimate) | $166 | 32% below price |
| Bull case (estimate) | $321 | 32% above price |
| Margin-of-safety price (calculated) | $108 | 56% below price |
| Price, Q4 2026 (reported) | $243.79 |
The bear case is an overbuild. The labs’ funding runs short, AWS growth falls from 27% to 3.5%, and price competition takes share. Capital already committed arrives anyway, so new AWS capital brings $0.30 of sales for three years and earns 6% to 12% after tax on AWS net property, below my 10.5% cost of capital. AWS margin sinks to about 18%, and after-tax operating profit is flat near $79B to $86B for five years. (estimate)4016 Because the labs are the customers that run short, the bear case carries the stakes in them at cost, $78.1B, and not at Amazon’s $245.8B after-tax mark. At the mark the bear is worth $73 and with the stakes at zero $50. (estimate)
My bull case sits close to consensus profit per share for three years, then rests on my assumptions. Its after-tax operating profit per share is +2.1%, −2.1% and +4.9% against consensus earnings per share for the years to September 2027, 2028 and 2029: $10.20 against $9.99, $12.93 against $13.21, and $16.04 against $15.30, the last resting on three estimates. (calculated) I calendarized the fiscal-year means; the provider and basis of the consensus are not stated, and I read them hours after the Q3 report, so some may not reflect it. Years 4 to 15 are mine: AWS operating margin rising to 42%, $0.60 rising to $0.95 of new AWS sales per $1 of capital, and growth after year 15 of 3.5%. The capital assumptions alone are worth $55 of the $155 between base and bull, and 60% of the bull’s value comes after year 15. (calculated) The bull spends less capital in year one, $245B, than the base, $266B, while growing faster, because it assumes more sales per dollar. My profit per share is before interest, which was a net $0.3B of income in the twelve months and a net $0.5B of expense in Q3 alone, and the expense grows as debt rises.4539
In the base, AWS earns 13% after tax on its year-end net property in year one, 10% in year four and 14% in year ten, against 15% in the twelve months to September 2026. (estimate)4039 The value after year 15 is 68% of my base, 56% of the bear and 60% of the bull. (calculated)
The discount rate
Most of the gap between the price and my base is the discount rate. My base earns 11% less than consensus per share in the year to September 2027 and 21% less in the year to September 2029, the rate is 1.5 points above the 9.0% on the Microsoft page, and the margin of safety comes off a base that is already below consensus. (calculated)404445
From my bull case to the margin of safety
Value per share after each layer, and the price against it. The first three rows differ in earnings and the discount rate; the last takes the margin of safety off my base.
| Layer | Value per share | Price, $243.79, is |
|---|---|---|
| Bull case: profit per share near consensus for three years, discounted at 10.5% | $321 | 24% below |
| Base case at 9.0%, the rate on the Microsoft page | $231 | 6% above |
| Base case at 10.5%: profit 11% to 21% below consensus | $166 | 47% above |
| Margin of safety: base case at 10.5% less 35% | $108 | 126% above |
At 9.0% the three cases are $78, $231 and $445; at 10.5% they are $57, $166 and $321. Percentages are the price against the value in the row. Source 10-Q Q3 2026; Q3 2026 release; Yahoo Finance quote; Treasury yields; Nasdaq consensus EPS [40][39][41][44][45]. Judgements are my estimates.
I discount at 10.5%. The capital asset pricing model gives 10.5%: the 4.98% ten-year Treasury plus Damodaran’s 4.20% implied equity risk premium for 1 October 2026, times Amazon’s ten-year monthly beta against the S&P 500 of 1.32. (calculated) Its five-year beta of 1.46 gives 11.1%. (calculated) The Microsoft page uses 9.0% at a beta of 0.97 (1.10 over five years), measured over the same 120 months, monthly, against the same index. The beta is the only input that differs. I do not adjust Amazon’s beta to Microsoft’s, and the grid below gives the value at each rate in between.242526
The 8.8% the price needs implies an equity premium of about 2.9 points at the ten-year beta. (calculated) Damodaran’s 4.20% was measured against a 5.29% risk-free rate on 1 October, and the ten-year yield was 4.98% in Q4 2026. On his own pair the rate is 10.8% and my base is $155. (calculated)4426
My base value at other discount rates
Value per share by discount rate and growth after year 15; the other inputs are my base case.
| Discount rate | Growth after year 15: 2.5% | 3.0% | 3.5% |
|---|---|---|---|
| 8.5% | $249 | $262 | $277 |
| 9.0% | $221 | $231 | $243 |
| 9.5% | $198 | $206 | $214 |
| 10.0% | $178 | $184 | $191 |
| 10.5% | $161 | $166 | $171 |
| 11.0% | $146 | $150 | $154 |
| 11.5% | $133 | $136 | $140 |
The price is $243.79. My base is the 10.5% row at 3.0%. Source 10-Q Q3 2026; Q3 2026 release; Treasury yields [40][39][44]. Judgements are my estimates.
Only the 8.5% row reaches the price; the 9.0% row tops out at $243. (calculated) One point on the discount rate moves my base by 18% to 24%: $136 at 11.5% and $206 at 9.5%. (calculated)4044
How the model works
How the model works
The choices that move the value, in the order a reader would ask about them.
| Choice | What I do |
|---|---|
| Engines and horizon | AWS and Stores (North America plus International), fifteen years to September 2041: ten explicit years, then five in which growth fades in a straight line to the terminal rate |
| Margin | A margin before depreciation, which I estimate, less depreciation built from the capital the growth needs. Net new capital in a year is the next year’s added sales divided by the sales each new dollar brings |
| Capital and lives | AWS: 60% servers and networking over 5.5 years, 40% data centers over 30. Stores: 55% equipment over 9 years, 45% buildings over 35. The property Amazon holds runs off over lives I estimate from the segment tables |
| Cash flow | After-tax operating profit less net new capital. Stock pay is a cost. Operating leases are not capital and their liabilities stay out of net debt. Working capital is not modeled; it used $11.5B, $15.5B and $20.0B in 2023, 2024 and 2025 |
| Tax | 21%, the US federal statutory rate. Amazon’s effective rate was 19.0%, 13.5% and 19.6% in 2023, 2024 and 2025, and its cash taxes are lower. At 19% the base is $173; at 17%, $179 |
| Net debt, stakes and shares | Net debt of $90.3B is deducted. Stakes: after-tax mark of $245.8B in the base and bull cases, cost of $78.1B in the bear. 10.813B shares on the 10-Q cover; values taken at the 30 September 2026 balance sheet |
Every figure here is my modeling choice or a reported number it rests on; the cases table carries the assumptions that differ by case. Source 10-K FY2025; 10-Q Q3 2026; Q3 2026 release [2][40][39]. Judgements are my estimates.
The 60% for AWS comes from the property note: servers and networking equipment at cost rose $59.3B in 2025, equal to 61% of AWS’s $96.5B of net property additions. Some of that equipment serves Stores, and the change is net of retirements. (calculated)2
The base reconciles to Amazon’s Q4 guidance and its capital spending language, and Q3 narrowed the stretch. It does not reconcile to Jassy’s projection for AWS in 2027 and 2028, which has its own section below. Year-one operating income of $122B is 16% above the $105.4B of the last four quarters before one-time items. After Q4 guidance of $28.5B to $33.5B it needs about $30.4B a quarter for the next three, against $28.1B in Q3, $28.0B before the energy gain. (estimate)4039 Q4 net sales are the highest of the year, and Prime Day moved out of Q3 this year, which lowered Q3 sales growth by about four points; guidance assumes no remeasurement of energy contracts.239 AWS sales of $226B in year one need sequential gains of about $4.2B a quarter from Q3’s $46.0B; Q3 itself added $3.8B and Q2 $4.6B. (calculated)39 AWS depreciation in year one is $50.3B, after $7.3B in Q1, $8.1B in Q2 and $9.2B in Q3, which needs a rise of about $1.3B a quarter, against $1.2B in Q3. (estimate)40 Capital spending incurred in year one is $266B, against a 2026 guide of about $220B in cash, of which $172.2B was spent in the first nine months. That leaves $48B for Q4, against $75.9B in Q3, and implies $218B for the first three quarters of 2027, about $73B a quarter; the 10-Q says 2027 cash capital spending will meaningfully increase. (calculated)4039
My base adds 3.7 points to Stores’ margin before depreciation over ten years. The mix is the support: advertising was 5.1% of Stores’ sales in 2019 and is 12.3% in the twelve months. (calculated)939 Amazon does not report what advertising earns, so the margin gain is my assumption. The first-year Stores margin in my base is 6.2%, against 6.7% in the first nine months of 2026 and 6.8% in the twelve months. Stores depreciation on the equipment Amazon holds ends in year 5 and steps down in year 6, which lifts Stores’ margin by about two points that year in every case. (estimate)39
What management projects, against my cases
Amazon’s Q3 release quotes Jassy on AWS: “projected revenue growth rates of over 40% both in 2027 and in 2028.” It also quotes him on AWS and Stores together: “There has never been a trillion dollar revenue business, and we may have two of them in the next 5-10 years.” (reported)39 On the call he said “we believe” AWS can do both, and that nobody can predict five to 10 years out with certainty.48 Neither statement is in the 10-Q, and the release’s guidance section covers Q4 and 2026 capital spending.4039
My 17.7% a year sits far below his 40%. The two cover different spans, so the fair comparison is year by year. In calendar 2027 my base has about 39%, just under him. In calendar 2028 it has about 31% against over 40%, which is about $319B of sales against about $345B. Even my bull has about 36% in calendar 2028, though its faster 2027 takes it to about $342B. After that my base fades to 7% by year ten and reaches $822B in the year to September 2036. It passes $1 trillion only in the year to September 2041, about five years past the slow end of his range. A trillion within ten years needs 20.0% a year. My bull gets there in the year to September 2035. (estimate)39
My cases against what management projected
Management’s words against the sales path of each case. The last row replaces the first two years of AWS growth in each case with management’s and changes no other input.
| Management | Bear | Base | Bull | |
|---|---|---|---|---|
| AWS growth, calendar 2027 | Over 40% | 23% | 39% | 43% |
| AWS growth, calendar 2028 | Over 40% | 16% | 31% | 36% |
| AWS net sales, calendar 2028 | $345B or more | $247B | $319B | $342B |
| AWS net sales, year to September 2036 | $1T possible | $354B | $822B | $1,089B |
| First year at $1T of sales, year to | 2031 to 2036 | After 2041 | Sep 2041 | Sep 2035 |
| Value per share, as set | n/a | $57 | $166 | $321 |
| Value with management’s two years | n/a | $44 | $167 | $319 |
Calendar figures fit a smooth quarterly path to each case’s September years, and 2026 includes my estimate for Q4, so they are approximate. $345B is 40% twice on about $176B for 2026; it is my arithmetic, and it is a floor, since he said over 40%. Source Q3 2026 release; Q3 2026 call transcript [39][48]. Judgements are my estimates.
I hold the base below him as a judgement, and I kept it after Q3. Growth of 40% in 2028 needs AWS to add about $6B to $8B of sales a quarter, against Q3’s $3.8B, and Q3 itself came in under the $4.2B a quarter my lower path needs. (estimate)39 Two customers that Amazon funds may fill about a third of the backlog, so part of the demand behind the projection rests on Amazon’s own money; Jassy calls the backlog well-diversified, and the 10-Q gives no customer’s share.4048 AWS’s cloud share fell from 30% to 28% in the year to the June quarter, and AWS sales per $1 of net property have fallen from $1.25 to $0.52.2829239 The evidence against me is real. Jassy says Amazon has “very good visibility into 2027 and 2028” because the largest capacity blocks are reserved well in advance.48 He can see those reservations and I cannot, so my 2028 may prove too low.
If he is right, the value moves much less than the sales, because AWS sales arrive after the capital that builds them. Put his two years into my cases and change nothing else, and the base moves from $166 to $167 and the bull from $321 to $319. The bear falls from $57 to $44, because it buys that growth at $0.30 of sales per $1 of capital; and with 40% through 2028 the bear’s story of the labs running short would have to wait until after 2028. (estimate) Now give the base his two years and then my bull’s growth, which reaches $1,083B in the year to September 2036, on my base margins and capital. AWS capital over four years rises $268B to $1,289B, and the base is $176 at 10.5%, with the price 39% above it. At the 9.0% I use for Microsoft the same path is $253, and the price is 4% below it. (estimate) So at 10.5% his sales do not reach the price on my margins and capital, and at 9.0% they do.
At 10.5%, after his two years, the price still needs AWS to grow 25.1% a year for the next eight, which ends near $1.9 trillion, nearly double the trillion he describes. (calculated) The bull’s $321 needs his sales and more: operating margins of 34% to 42%, and $0.60 rising to $0.95 of sales per $1 of capital. Management gives no AWS margin guide. Olsavsky said on the call that AI’s lower margins and component prices are pressures, and Jassy called the capital this growth needs meaningful.48 I have not moved the cases to close this gap. It stands on the page, and 2028 will test it.
Outside the cases
The stakes in Anthropic, OpenAI and others sit outside the cash flows. The base and bull cases carry them at their after-tax mark and the bear case at cost. Other items below also sit outside the cases.
Items outside the cases, or across all three
Effect on the value per share; the base and bull cases carry the stakes at their after-tax mark and the bear case at cost.
| Item | Effect on the value per share | Value after the item |
|---|---|---|
| Base case with the stakes in Anthropic, OpenAI and others at cost ($78.1B), not the after-tax mark ($245.8B) | −$16 | $150 |
| Base case with the stakes at 75% of the after-tax mark | −$6 | $160 |
| Base case with the stakes at zero | −$23 | $143 |
| Bear case with the stakes at the after-tax mark, not at cost | +$16 | $73 |
| Bear case with the stakes at zero | −$7 | $50 |
| Dating the base case from Q4 2026 instead of 30 September | +$1 | $167 |
| Counting the 223M unvested stock awards (11.034B shares), base case | −$3 | $163 |
| Taxing operating profit at 19%, near Amazon’s 2025 effective rate of 19.6%, not 21% | +$7 | $173 |
| Starting Stores’ margin 0.9 points higher, as if the net one-time items were all in Stores | +$2 | $168 |
| Globalstar ($10.9B with debt) | not modeled | no change assumed |
The $21.3B paid to OpenAI in Q3 moved cash into investments at cost and left value unchanged. The $17.5B term loan and the September sterling notes are in net debt at 30 September. Anthropic's gain is taxed at 24%, the rate on the first-half 2026 adjustments (the Q2 release shows $13.7B of tax on a $55.7B pre-tax gain, 24.6%). Dated from Q4 2026, the price needs AWS growth of 27.9% and an 8.8% discount rate on my base. Source 10-K FY2025; 10-Q Q3 2026; Q3 2026 release; 8-K Globalstar; 8-K term loan; 8-K sterling notes [2][40][39][17][18][19]. Judgements are my estimates.
The margin of safety
- Price$243.79Close, Q4 2026 [42]
- Base value$166My estimate (estimate)
- Margin of safety below$10835% under my base value (calculated)
I set the margin of safety at 35% below my base value, which gives $108. My rule for a discount to base value is 25% for a business with net cash and no customer above a tenth of revenue, 30% when one cycle or two customers drive results, and 35% when fixed charges such as leases sit ahead of the shares. Amazon meets the second and third clauses, and the higher governs. Two customers that Amazon funds may fill about a third of the backlog, as the moat section shows. Fixed charges are large: debt with interest is $294.3B and leases, including $164.9B signed and not yet started, are $315.9B, together $610.2B, 5.8 times twelve-month operating income. Total contractual obligations are $883.6B. (calculated)4039 The bear case I describe is the one in which those charges stay and the revenue does not. At 30% the line would be $116.
The line sits 10% below $120, the value of my base if new AWS capital never earns more than today’s $0.45 of sales per dollar: it pays for the whole improvement in capital productivity failing to arrive, and a little more. (estimate) The price is 126% above that line, so the stock would have to fall about 56% to reach it. (calculated) The lowest close of the past year was $198.79 on 13 February 2026, still 84% above it; the stock is 14.2% below its $284.02 close of 3 August 2026. (calculated)4341 The close used here came before Amazon released Q3 after the market closed; the stock traded near $239 in the next session.41
Where this could be in 5 and 10 years
Each figure is my model's value at that date: the present value, in that year's dollars, of the owner cash that comes after it, at 10.5%. The stakes stay at today's marks and net debt at today's level. I divide by today's 10.813B shares. (calculated) Owner cash is after-tax operating profit less net new capital. Amazon pays none today, so a negative year means the business needs funding.
| Value Sep 2031 | Value Sep 2036 | Cash to 2036 | Return a year | |
|---|---|---|---|---|
| Bear | $95 | $125 | $29 | −4.5% |
| Base | $294 | $398 | $44 | 6.1% |
| Bull | $523 | $700 | $130 | 13.0% |
Owner cash is per share, summed to September 2036, with the negative early years netted out. Return a year is the year-10 value plus owner cash, against the Q4 2026 price of $243.79, over ten years. (calculated)
For the base to hold at five years, AWS has to reach $534B of sales by September 2031, from $161B now, with Stores at $981B. AWS grows 40% in the first year and about 18% a year over ten. At ten years AWS is $822B at a 32% operating margin. The base needs $1.6T of capital spending in the first five years, so owner cash is negative until year 5, a total of −$21 a share. (estimate)
The bear has AWS growing 8% a year to $354B at a 24% margin. The bull has 21% a year to $1,089B at 42%. They also differ on how much AWS revenue each new capital dollar buys, $0.50, $0.70 and $0.95 by year 10. The rate matters as much: my base is $231 at 9% and $124 at 12%. About 72% of the base's year-10 value is the terminal value after 2041. (estimate)
The most likely way the base is wrong is capital. If a new dollar buys 20% less AWS revenue than I assume, the year-10 value is $343, not $398. (calculated)
These are estimates of value, not forecasts of the share price. The market price can sit above or below value for years.
Other uses of the same dollar
The ten-year Treasury pays 4.98%.44 My base here returns 6.1% a year, about 1.1 points more. (estimate) The closest comparable on this site is Microsoft: 4.5% on its base, −3.5% on its bear and 9.6% on its bull.60 Amazon’s spread is wider, from −4.5% to 13.0%. Its page uses a 9.0% rate, not 10.5%.
How good the business is and how good the price is are two questions. AWS earned a 38.7% margin last quarter. Yet owner free cash flow was −$29.4B over 2016 to 2025, and at $243.79 the price is 47% above my base. The price needs AWS to grow 28% a year for ten years.392
The case for the price needs several things at once: two years of 40% AWS growth, $0.60 or more of sales per dollar of new capital, and a Stores margin near 12%. My guesses are 50%, 35% and 35%. Multiplied, that is about 6%. (estimate) They overlap, so the true figure is higher, but not high.
The case for the price
What most people miss
The backlog outside OpenAI and Anthropic is large. The 10-Q names at least $238B from those two. Take that out of the $578B and up to about $340B is left, if those deals are fully inside it. That is nearly double the whole $177B backlog at the end of 2024.407
Jassy said on the Q3 call that short-term capacity on older Trainium chips now costs more than in the first half.48 A 6.5-year server life, against my 5.5, adds $9 a share in my model.
Amazon’s chips are further along than headlines say. Revenue commitments for Graviton and Trainium each rose more than 20 times in a year, and most of Bedrock, its AI service, already runs on Trainium. Amazon plans to offer the chips to outside customers from late 2027.48
The bull case
In their August letter Bill Ackman and Ryan Israel of Pershing Square make the clearest case. Worry about data center spending, they say, understates Amazon’s resilience. Retail units rose 15% in Q1, the fastest since 2021. Longer term, they believe Amazon can “compound earnings at a 20%-plus rate” on AI, online shopping and wider retail margins.49 Pershing’s 13F listed 8.56M shares at 30 June, about 25% fewer than in March.5051
Gavin Baker of Atreides said at the Sohn conference in May that Trainium is the most underrated rival to Nvidia. His reason is the network linking the chips: he said only Nvidia and Trainium have that kind working. I read this in reports, not a transcript.5758
After Q3, JPMorgan said management can see enough demand to commit to 40%-plus growth for two years.59
Altimeter listed 2.43M shares, ARK 1.59M and Atreides 0.97M at 30 June.525453 I found no 2026 argument from Altimeter or ARK. Berkshire listed 2.28M at the end of 2025 and none at 30 June.5556
Against reality
The 28% a year on this page changes AWS growth and leaves everything else at my base. A bull has a shorter route. Give AWS Jassy’s two years of 40%, then my base fade39: 18.3% a year for ten years, to $867B. Add my bull capital, $0.60 rising to $0.95 of sales per new dollar. Add my bull Stores margin, about 12% by year ten. That path is worth about $247 at 10.5%, with AWS margin bottoming near 31%, or $231 with the stakes at cost. (estimate) If Amazon hits those three targets, the price is possible.
Today’s numbers fall short on each. AWS grew 39%, and 40% needs about $50B in Q4, $4.2B more than Q3. Stores earns 6.8%. The widest gap is sales per new dollar: $0.29 since 2023, $0.56 with a one-year lag. The path allows about $245B of capital in its first year, about $61B a quarter, less than my base’s $266B. Q3 was $76.8B, counting unpaid bills, and the last twelve months $237.4B.3940 The 2026 guide leaves $48B for Q4, so the path fits about $260B in 2027. The 10-Q says only that 2027 rises meaningfully.40 One year at Q3’s pace costs about $10 a share. Stuck at $0.60, the path is $216. On my base capital, $186. (estimate) My base compounds profit per share about 17% a year for three years, below Pershing’s 20%-plus. This path does 25%.
What they have to hit
Thresholds come from this path; stricter signposts are noted. Filings are free on SEC EDGAR (opens in a new tab). February dates are expected.2
| Indicator | Today | What the case needs | Where to track it | Next check |
|---|---|---|---|---|
| AWS quarterly net sales | $46.0B, up 39% (Q3 2026) (reported)39 | 40% or more for 2027, about $246B; about $59B in the June 2027 quarter (my bull signpost: $61B) | Quarterly earnings release, Segment Information, AWS “Net sales” line | Q4 release, expected early February 2027: about $50B keeps the path |
| AWS sales added per $1 of net property added | $0.29 since end 2023; $0.56 for 2025 sales over 2024 property (calculated)24039 | $0.60 or more for the year to June 2028 sales over the year to June 2027 property, rising to $0.95 by year ten | 10-Q Note 8 (10-K Note 10), “Property and equipment, net by segment”, AWS line, against AWS net sales | 10-K, expected early February 2027; the test year ends June 2028 |
| AWS depreciation, share of AWS sales | 20.1% (Q3); 19.3% (twelve months) (calculated)4039 | Below 25% in the year to June 2029 (base: about 29%), then a peak near 26% in 2030, which keeps AWS margin near 31% | 10-Q Note 8 (10-K Note 10), “Total depreciation and amortization expense, by segment”, AWS line, over AWS net sales | 10-K, expected early February 2027; the test year ends June 2029 |
| Stores operating margin | 6.8% (twelve months) (calculated)39 | About 7.3% in the year to September 2027 (my signpost: above 7.4% by June 2027), on the way to about 12% | Quarterly earnings release, Segment Information: North America plus International operating income over net sales | Q4 release, expected early February 2027; the test year ends June 2027 |
| Contracted backlog and weighted life | $578B; 6.1 years (reported)40 | Above $600B with a life above 6 years, and no quarterly fall | 10-Q Note 1 (10-K Note 1), “Unearned Revenue”, the performance obligations paragraph | 10-K, expected early February 2027 |
| Capital spending | $76.8B in Q3 and $237.4B over twelve months, counting bills not yet paid; cash guide about $220B for 2026 (calculated)3940 | About $245B incurred in the year to September 2027, which fits a 2027 of about $260B, with AWS growth above 40% (my bull signpost is stricter: flat) | Quarterly earnings release, twelve-month cash flow columns: “Purchases of property and equipment” less “Proceeds from property and equipment sales and incentives”, plus “Increase (decrease) in property and equipment acquired but not yet paid”; the guide in the release and on the call | Q4 release and call, expected early February 2027 |
Where I come down
The chip evidence moved me most, because it could lift sales per dollar of capital, the $55 lever between my base and bull. The spending did not move me: no number Amazon reports yet shows 40% growth on less capital than my base. Two years at $0.60 or better, with spending near the $260B this path allows, would raise my values. Until then they stay at $57, $166 and $321.
Risks, and what would change my view
The risk I weight most is the one management states itself: demand for AWS capacity is ahead of supply, and the build to meet it drains cash. Jassy said on the Q2 call that even at $220B of spending Amazon “will still not have enough capacity” for 2026’s demand, and the filings cite energy shortages and volatility in resources, including memory chips, as limits.3240
- The build and its funding. Net capital spending was $210.7B in the twelve months against $168.3B of operating cash flow, and the 2026 guide rose by $20B in Q2 on the cost of memory and held at about $220B in Q3. Leases not yet started ($164.9B) and purchase obligations ($254.4B, $159.6B of it for property and equipment) come on top, and total contractual obligations are $883.6B.394032 Jassy expects free cash flow headwinds until the data centers under construction are monetized.32 In my base, free cash flow is negative for four years and the cumulative outflow reaches about $252B in the year to September 2030, financed with debt. (estimate)
- Two customers that Amazon funds. The moat section sets out the numbers. A commitment is only as good as the customer’s own funding. Rivian shows what a mark can do.98
- Depreciation and margins. AWS depreciation was $9.2B in Q3 against $5.6B a year earlier, and my base takes it to 31.5% of AWS sales by September 2030. A faster obsolescence cycle in AI hardware would raise it further. (estimate)402
- Share and price in cloud. Amazon’s share of cloud infrastructure fell from 30% to 28% in a year while Google’s rose from 13% to 15%.2829
- Regulation and the rest. Private plaintiffs, state attorneys general and the FTC have brought antitrust and consumer cases in the United States, Canada and the United Kingdom. In August 2026 the FTC and 22 state attorneys general sued over reserve prices in Amazon’s sponsored-ad auctions, and Texas filed its own case. The FTC settlement cost $2.5B in Q3 2025, EU fines include EUR 746M under appeal in Luxembourg and EUR 752M in Italy, and Kove IO won $525M plus $148M of interest against AWS, on appeal. The 10-Q says China-based sellers account for significant portions of third-party seller services and advertising revenue.402
What would move me
| Signpost | Latest | Toward the bull case | Toward the bear case |
|---|---|---|---|
| AWS quarterly net sales39 | $46.0B, up 39% (Q3 2026) (reported) | $61B or more in the June 2027 quarter (base: about $59B) | Below $53B in the June 2027 quarter |
| AWS sales added per $1 of net property added24039 | $0.29 since end 2023; $0.56 for 2025 sales over 2024 property (calculated) | $0.60 or more for the year to June 2028 sales over the year to June 2027 property (base: $0.45) | $0.30 or less |
| AWS operating margin3940 | 38.7% (Q3); 38.5% without the energy gain; 37.8% (twelve months) (reported) | Above 35% in the year to June 2028 | Below 29% in the year to June 2028 |
| AWS depreciation, share of AWS sales4039 | 20.1% (Q3); 19.3% (twelve months) (calculated) | Below 25% in the year to June 2029 | Above 30% in the year to June 2029 |
| Contracted backlog and weighted life40 | $578B; 6.1 years (reported) | Above $600B with a life above 6 years | Down in any quarter, or a life under 5 years |
| Stores operating margin39 | 6.8% (twelve months); 6.6% (Q3, both segments); 7.7% (North America, Q3) (calculated) | Above 7.4% in the year to June 2027 | Below 6.2% in the year to June 2027 |
| Share of cloud infrastructure, whole points2829 | 28% (Q2 2026) (reported) | 28% or better through 2027 | 26% or lower |
| Capital spending guide4039 | About $220B for 2026, held in Q3; 2027 to rise meaningfully (reported) | Flat for 2027 with AWS growth above 40% | Raised again with AWS growth below 30% |
| Marks on Anthropic and OpenAI40 | $298.8B recorded (reported) | Held at the next funding round | Any write-down, or backlog tied to either falling |
What Q3 showed against the tests
Amazon reported Q3 on 29 October, after the close, and filed its 10-Q on 30 October.40 Net sales were $201.9B against a guide of $197.0B to $202.0B, at the top of the range. Operating income was $28.1B against a guide of $22.5B to $26.5B, $1.6B above the top, up from $17.4B a year earlier; the margin was 13.9%, the highest Amazon has reported. AWS sales were $46.0B, up 39%, and AWS operating income was $17.8B, up from $11.4B.394
Against my base, Q3 landed close. AWS added $3.8B of sales from Q2 where my base needs about $4.2B a quarter, so the sales path is a little behind the base and the margin is well ahead: AWS earned 38.7% against 34.7% in my first year. AWS depreciation rose $1.2B from Q2 against about $1.3B needed, on pace. The backlog rose $82B to $578B with a 6.1-year life, short of the $600B signpost but past its 6-year life test. AWS grew 39% with the capital spending guide held at about $220B, so the bear signpost of a raised guide with growth below 30% was not met, and the bull signpost of a flat 2027 was not met either: the 10-Q says 2027 cash capital spending will meaningfully increase. Stores earned 6.8% over the twelve months, between my 6.2% and 7.4% signposts. Synergy’s cloud share for the September quarter was not out, and the recorded value of the Anthropic, OpenAI and other stakes rose by $69.1B to $298.8B: $21.3B of cash into OpenAI and a $48.3B mark-up of the Anthropic notes through other comprehensive income, less about $0.5B net on other holdings, with no Q3 adjustment to the preferred stock reported.3940
Q3 did not change my assumptions, and it did bring a projection my base does not match: AWS growth of over 40% in 2027 and in 2028, against about 39% and about 31% for those calendar years in my base. (estimate)39 It moved the starting point forward a quarter, raised the stakes and the net debt together, and left the verdict where it was: the price needs AWS to grow 28.0% a year for ten years, and my base is 17.7%. Free cash flow fell to −$42.4B over the twelve months, and net debt rose to $90.3B from $32.3B in the quarter. My base value moved from $163 to $166.
Sources
- 1SEC XBRL companyfacts, Amazon.com, Inc. (CIK 0001018724) (opens in a new tab)
- 2Amazon Form 10-K, fiscal year ended 31 December 2025 (opens in a new tab)
- 3Amazon Form 10-Q, quarter ended 30 June 2026 (opens in a new tab)
- 4Amazon Q2 2026 earnings release (8-K Exhibit 99.1) (opens in a new tab)
- 5Amazon Form 10-Q, quarter ended 31 March 2026 (opens in a new tab)
- 6Amazon Form 10-Q, quarter ended 30 September 2025 (opens in a new tab)
- 7Amazon Form 10-K, fiscal year ended 31 December 2024 (opens in a new tab)
- 8Amazon Form 10-K, fiscal year ended 31 December 2023 (opens in a new tab)
- 9Amazon Form 10-K, fiscal year ended 31 December 2021 (opens in a new tab)
- 10Amazon Form 10-K, fiscal year ended 31 December 2020 (opens in a new tab)
- 11Amazon Form 10-K, fiscal year ended 31 December 2018 (opens in a new tab)
- 12Amazon Form 10-K, fiscal year ended 31 December 2017 (opens in a new tab)
- 13Amazon 2026 proxy statement (DEF 14A) (opens in a new tab)
- 14Amazon 2025 proxy statement (DEF 14A) (opens in a new tab)
- 15Andy Jassy 2025 letter to shareholders (8-K Exhibit 99.1) (opens in a new tab)
- 16Amazon and OpenAI strategic partnership (8-K Item 1.01 and Exhibit 99.1) (opens in a new tab)
- 17Amazon to acquire Globalstar (8-K Exhibit 99.1) (opens in a new tab)
- 18Amazon $17.5B delayed draw term loan (8-K Items 1.01, 2.03) (opens in a new tab)
- 19Amazon sterling notes offering (8-K Item 8.01) (opens in a new tab)
- 20Amazon election of director Kevin R. Mandia (8-K Item 5.02) (opens in a new tab)
- 21AMZN daily chart, Yahoo Finance, close on 23 October 2026 (opens in a new tab)
- 22AMZN historical quotes, Nasdaq.com, close on 23 October 2026 (opens in a new tab)
- 23AMZN daily closes 2016 to 2026 and S&P 500 total return index, Yahoo Finance (opens in a new tab)
- 24AMZN and S&P 500 monthly closes, Yahoo Finance (opens in a new tab)
- 25US Treasury daily par yield curve rates, 2026 (opens in a new tab)
- 26Damodaran implied equity risk premium, 1 October 2026 (opens in a new tab)
- 27AMZN consensus EPS forecasts, Nasdaq.com analyst API (opens in a new tab)
- 28Synergy Research Group: Q2 cloud market passes $143 billion (opens in a new tab)
- 29Synergy Research Group: Q2 cloud market nears $100 billion (opens in a new tab)
- 30Alphabet Q2 2026 earnings release (8-K Exhibit 99.1) (opens in a new tab)
- 31SEC XBRL companyfacts, Walmart Inc. (CIK 0000104169), 10-K for fiscal year ended 31 January 2026 (opens in a new tab)
- 32Amazon Q2 2026 earnings call transcript (third-party reproduction) (opens in a new tab)
- 33Amazon will share its Q3 2026 earnings on October 29 (opens in a new tab)
- 34Microsoft FY2027 segments and investor metrics (8-K Exhibit 99.1) (opens in a new tab)
- 35Amazon 2026 annual meeting results (8-K Item 5.07) (opens in a new tab)
- 36Microsoft Form 10-K, fiscal year ended 30 June 2026 (opens in a new tab)
- 37Microsoft Q4 FY26 earnings release (8-K Exhibit 99.1) (opens in a new tab)
- 38Jeffrey P. Bezos Forms 4 for Amazon.com, Inc., filed 5 March 2025 to 27 August 2026 (EDGAR CIK 0001043298) (opens in a new tab)
- 39Amazon Q3 2026 earnings release (8-K Exhibit 99.1) (opens in a new tab)
- 40Amazon Form 10-Q, quarter ended 30 September 2026 (opens in a new tab)
- 41AMZN daily chart, Yahoo Finance, close on 29 October 2026 (opens in a new tab)
- 42AMZN historical quotes, Nasdaq.com, close on 29 October 2026 (opens in a new tab)
- 43AMZN daily closes 2016 to 2026 and S&P 500 total return index, Yahoo Finance (opens in a new tab)
- 44US Treasury daily par yield curve rates, 2026 (opens in a new tab)
- 45AMZN consensus EPS forecasts, Nasdaq.com analyst API (opens in a new tab)
- 46Alphabet Q3 2026 earnings release (8-K Exhibit 99.1) (opens in a new tab)
- 47Microsoft Q1 FY27 earnings release (8-K Exhibit 99.1) (opens in a new tab)
- 48Amazon Q3 2026 earnings call transcript (third-party reproduction) (opens in a new tab)
- 49Pershing Square Holdings 2026 Interim Report, letter to shareholders (opens in a new tab)
- 50Pershing Square Inc. Form 13F, 30 June 2026 (opens in a new tab)
- 51Pershing Square Capital Management Form 13F, 31 March 2026 (opens in a new tab)
- 52Altimeter Capital Management Form 13F, 30 June 2026 (opens in a new tab)
- 53Atreides Management Form 13F, 30 June 2026 (opens in a new tab)
- 54ARK Investment Management Form 13F, 30 June 2026 (opens in a new tab)
- 55Berkshire Hathaway Form 13F, 31 December 2025 (opens in a new tab)
- 56Berkshire Hathaway Form 13F, 30 June 2026 (opens in a new tab)
- 57Gavin Baker on Trainium at the Sohn conference (third-party report) (opens in a new tab)
- 58Inside the mind of a tech investor: Sohn 2026 (opens in a new tab)
- 59Amazon shares are tumbling after third-quarter earnings miss (opens in a new tab)
- 60Microsoft (MSFT): the software moat, the AI build and the price, Return a year table (opens in a new tab)
How the figures are labelled
(reported)Reported: taken from a filing or a price feed, as printed.
(calculated)Calculated: arithmetic on reported figures, such as a margin or a growth rate.
(estimate)Estimate: my judgement, such as a case value or a growth assumption.
The price
Close in Q4 2026: $243.79, from Yahoo Finance [41] and Nasdaq [42]. Retrieved in Q4 2026.
Fiscal years are calendar years. TTM is the four quarters to 30 September 2026, calculated as 2025 less the first nine months of 2025 plus the first nine months of 2026 (cash flow lines are Amazon's own twelve-month figures). Q3 2026 results came after this close. Per-share values before 2022 are divided by 20 for the 20-for-1 split of May 2022. Access and retrieval times on this page are UTC.
The valuation
Fifteen-year model of free cash flow for two engines, AWS and Stores (North America and International, with advertising, subscriptions and seller services inside Stores), for the years to September 2027 through September 2041. Each engine's operating margin is a margin before depreciation less depreciation built from the capital its growth needs, and the cash flows are discounted at 10.5%. Net debt is deducted. The stakes in Anthropic, OpenAI and others are added after tax at Amazon's own marks in the base and bull cases, and at cost in the bear case. Values are taken at the 30 September 2026 balance sheet, the last one filed; rolled to Q4 2026 they are about 1% higher (bear $57, base $167, bull $323). Per-share values divide by the 10.813B shares on the 10-Q cover; counting the 223M unvested stock awards (11.034B in all) lowers each value by 2.0%, to $163 for the base.
The margin-of-safety price is my base value less 35%. No rating: the page states a range and the price, and leaves the decision to the reader.
Research, not investment advice. Figures as of .
Legal information and disclosures
These are my own views as of the update shown on this page. They can change without notice, and I have no duty to update them. Past performance does not indicate future results, and any investment can lose money.
This is for education only. It is not investment, legal, tax or accounting advice, and it is not an offer to sell or a solicitation to buy any security in any jurisdiction. It does not consider your goals or circumstances.
Figures from company filings and other third parties are believed to be reliable, but I have not independently verified them and cannot guarantee them. Bear, base and bull values, and anything marked as an estimate, are my own and rest on assumptions that may prove wrong.
Please do not copy or republish this material without my written consent.