Will AWS' Growing Capital Spending Boost or Burden Amazon Stock?

Amazon's AMZN aggressive capital expenditure plans for its Amazon Web Services (“AWS”) division signal confidence in the cloud computing market's growth trajectory, positioning the stock as a compelling investment opportunity despite near-term margin pressures.The company reported third-quarter operating income of $17.4 billion, demonstrating robust profitability even as it scales infrastructure investments. AWS generated $27.5 billion in revenues during the quarter, representing 19% year-over-year growth, with the segment's operating margin expanding to an impressive 38%. This performance underscores the division's ability to maintain pricing power while capturing incremental market share in enterprise cloud services.Management guided fourth-quarter revenues between $181.5 billion and $188.5 billion, reflecting anticipated momentum across all business segments. The company expects operating income to be in the range of $16 billion to $20 billion, indicating sustained profitability despite elevated capital outlays. Amazon projected capital expenditures exceeding $75 billion for 2024, with the majority allocated to AWS infrastructure supporting artificial intelligence workloads and expanded data center capacity.In November 2025, AWS announced significant partnerships with leading AI companies and expanded availability of its generative AI services through Amazon Bedrock. The division introduced enhanced machine learning capabilities and launched new data center regions in strategic international markets, strengthening its competitive positioning against Microsoft Azure and Google Cloud Platform.The increased capital spending directly addresses surging demand for AI computing resources, where AWS maintains technical advantages through its custom silicon offerings, including Trainium and Inferentia chips. These proprietary processors deliver superior price-performance ratios for customers training and deploying large language models, creating differentiation that justifies premium pricing.While heightened capital intensity temporarily compresses free cash flow generation, the investments establish durable competitive moats in high-growth cloud infrastructure markets. AWS' expanding revenue base and margin profile suggest the capital deployment will generate substantial returns, making elevated spending a strategic asset rather than a fundamental burden for Amazon's valuation trajectory.Cloud Rivals Escalate Infrastructure InvestmentsMicrosoft MSFT announced capital expenditures approaching $80 billion for fiscal 2025, primarily funding Azure infrastructure expansion and AI capabilities. Microsoft Azure reported 33% revenue growth in the recent quarter, reflecting strong enterprise adoption. Alphabet GOOGL-owned Google disclosed plans for approximately $75 billion in capital spending for 2024, with Google Cloud achieving $11.4 billion in quarterly revenues and 35% growth. Microsoft maintains the second-largest cloud market share at approximately 20%, while Google holds roughly 11% of the global cloud infrastructure market. Both Microsoft and Google are prioritizing AI-focused data center buildouts, with Google emphasizing its TPU processors and Microsoft leveraging partnerships with OpenAI to differentiate their respective cloud platforms amid intensifying competition.AMZN’s Share Price Performance, Valuation & EstimatesAmazon shares have returned 13.5% in the year-to-date period compared with the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector’s growth of 16.5% and 8.8%, respectively.AMZN’s YTD Price PerformanceImage Source: Zacks Investment ResearchFrom a valuation standpoint, AMZN stock appears overvalued, trading at a forward 12-month price/earnings ratio of 32.9X, higher than the industry’s 25.68X. Amazon has a Value Score of D.AMZN’s ValuationImage Source: Zacks Investment ResearchThe Zacks Consensus Estimate for AMZN’s 2025 earnings is pegged at $7.15 per share, which has seen an upward revision of 4.5% over the past 30 days. This indicates a 29.29% increase from the figure reported in the year-ago quarter.Amazon.com, Inc. Price and Consensus Amazon.com, Inc. price-consensus-chart | Amazon.com, Inc. QuoteAmazon currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Quantum Computing Stocks Set To SoarArtificial intelligence has already reshaped the investment landscape, and its convergence with quantum computing could lead to the most significant wealth-building opportunities of our time.Today, you have a chance to position your portfolio at the forefront of this technological revolution. In our urgent special report, Beyond AI: The Quantum Leap in Computing Power, you'll discover the little-known stocks we believe will win the quantum computing race and deliver massive gains to early investors.Access the Report Free Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks