Amazon (NASDAQ: AMZN), the world’s largest e-commerce and cloud infrastructure company, has delivered an impressive 534% gain over the past ten years. But does its stock still have more upside potential over the next decade?
What are Amazon’s biggest catalysts?
Amazon generates most of its revenue from its e-commerce business, but its cloud platform, Amazon Web Services (AWS), brings in most of its operating profits.
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Over the past ten years, AWS’ annual revenue jumped from $7.9 billion to $128.8 billion, while its operating margin expanded from 19.2% to 35.4%. AWS’ surging profits enabled Amazon to expand its Prime ecosystem with more discounts, hardware devices, streaming media services, and other loss-leading strategies. It’s already locked in more than 200 million Prime subscribers worldwide, which gives it a wide moat against other online and brick-and-mortar retailers.
AWS already hosts tens of millions of websites and apps, and it’s helping its developers build and train new generative AI apps on platforms like Bedrock and SageMaker. Amazon has also been producing its own first-party AI accelerators, and it owns nearly a fifth of Anthropic — the rapidly growing AI company that plans to go public by the end of 2026.
All of those AI catalysts for AWS — along with the expansion of its e-commerce business into higher-growth overseas markets and the growth of its higher-margin advertising business — could drive its earnings growth over the next decade.
What are Amazon’s biggest challenges?
Amazon’s growth rates are impressive, but its expansion will be costly. It expects its capex to reach $220 billion in 2026 (up from $131.8 billion in 2025) and to rise further in 2027. That increased spending — and competition from other hyperscalers — could compress AWS’ margins. That pressure could also make it tougher for Amazon to expand its lower-margin retail business.
Rising interest rates will make it more expensive for Amazon to expand its AI infrastructure, reduce the market’s demand for its cloud services, and compress its valuation. Inflation, which has been exacerbated by the Iran war and the Trump Administration’s unpredictable tariffs, could also throttle the growth of its retail business (including Whole Foods).
Is Amazon a stock to buy, hold, or avoid?
I initially invested in Amazon in early 2016, and I only sold a quarter of my position after the stock quadrupled from my average purchase price. I’ve been holding the rest since then, and I don’t plan to sell my shares because it’s still one of the easiest ways to stay invested in the booming e-commerce, cloud, AI, and digital advertising markets.
If Amazon matches analysts’ estimates through 2028, grows its EPS at a 15% CAGR through 2036, and trades at 25 times its current year’s earnings, its stock would more than quadruple to nearly $1,120 over the next decade. That ride could be bumpy, but I plan to stick with Amazon — even though it’s already my top position and accounts for nearly 10% of my portfolio — for the foreseeable future.
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Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
