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AMZN — Deck

Amazon · AMZN · NASDAQ

Amazon operates an online retail marketplace, the Amazon Web Services hyperscale cloud business, a digital advertising platform, and Prime subscriptions, generating revenue from product sales, cloud-services fees, ad placements, and membership fees.

$263.04
Price
$2.86T
Market cap
$716.9B
Revenue (FY2025)
$128.7B
AWS revenue (FY2025)
Listed in 1997 at a split-adjusted ~$0.10; rode a ~95% drawdown through the dot-com bust before compounding through retail, AWS, and AI to $263 today — roughly 2,700× the IPO close including splits.
2 · The tension

The $200B AI bet just broke the cash flow

  • Capex. FY25 capex hit $131.8B (18.4% of revenue, 2.0× depreciation — a 30-year high); FY26 guide is $200B. AWS contracted backlog of $244B (+40% YoY) is the demand anchor management points to.
  • Free cash flow collapsed. FCF fell from $32.9B to $7.7B in one year — FCF/Net-Income of 10%, the lowest in a decade. Operating cash flow ($139.5B) still funds the build with 0.21× ND/EBITDA and $123B of cash; no dilution required.
  • The pivot is AWS segment margin. Roughly $50–65B of incremental annual depreciation hits the P&L over the next 24 months. Holding 35% validates the cycle-three pattern; compression below 30% breaks it.
Three prior FCF collapses (2014, 2021–22, 2025) each preceded a record-margin year within 24 months — but never at this dollar magnitude.
3 · Variant perception

Cheapest Amazon since 2008 — only if you trust the denominator

  • The 17.2× anchor. EV/EBITDA sits ~1σ below the 10-year mean of 28.4× — the entire bull deck rests on this print. Strip the FY25 tailwinds and the underlying multiple is closer to 19–20×, in line with the 5-year average of 20.3×.
  • $15.2B Anthropic mark. An unrealized fair-value gain on Anthropic preferred stock sits in Other Income — 16% of pretax — and lifts FY25 EPS by an estimated $1.10–$1.30 net of tax. Reverses one-for-one on a flat or down round.
  • $24B DPO stretch + $4B tax windfall. Days payable extended from 100 to 111 in one year while accounts payable grew 29% on 9% COGS growth; the 2025 Tax Act bonus depreciation cut cash taxes from $12.3B to $8.3B. Together these inflated FY25 CFO by roughly $28B.
The Q2 10-Q in late July refreshes the AP balance and the next Anthropic mark in the same disclosure — that single window resolves more of the disagreement than any other event in the next six months.
4 · Money picture

A $717B retailer that mostly sells cloud and ads

$716.9B
Revenue (FY2025) +12% YoY
11.2%
Operating margin record; 5.3% in FY21
57%
AWS share of operating profit on 18% of revenue
$80B
Ad revenue run-rate +22% YoY

AWS earns 35¢ on the dollar; North America retail earns 7¢; International earns 3¢. Three quarters of operating profit comes from cloud and advertising — the rest of the company is a captive consumer flywheel that monetizes through 3P-seller fees and ad inventory. Operating margin doubled in two years; the open question is whether $200B of capex compresses it back as depreciation lands.

5 · Catalyst calendar

Two prints decide it; the FTC monopoly trial slipped to 2027

  • Late July 2026 — Q2 FY26 print. First test of the Q1 trajectory off a tougher comp, with a $1B Amazon Leo cost step-up and the OI guide ($20–24B) running slightly below sell-side. The 10-Q discloses the AP balance and refreshed AWS backlog — the cleanest single read on the variant view.
  • Late October 2026 — Q3 FY26 print. The pivot. FY25's $132B capex begins flowing through depreciation; the bull case requires AWS segment margin above 33% with growth above 25%. A miss on either side moves the stock 10% in a session.
  • H2 FY26 — next Anthropic external mark. A flat or down round reverses $1+/share of GAAP EPS in a single line and reframes whether FY25 was the run-rate. The FTC monopoly bench trial — once the dominant 2026 risk — has been pushed to February 9, 2027.
6 · Bull and Bear

Lean long, wait for confirmation — the franchise favors the bull, the entry doesn't

  • For. 17.2× EV/EBITDA is a generational floor for this franchise; AWS just reaccelerated to 24% in Q4 and 28% in Q1 FY26 — a 15-quarter high — on $244B of contracted backlog with named wins from OpenAI, Visa, BlackRock, Adobe, and the Meta–Graviton deal signed April 24.
  • For. Operating cash flow ($139.5B) already funds the $200B capex line; the balance sheet has actively de-leveraged through the build (D/E from 0.96 to 0.37 in three years). North America retail margin doubled to 9% over eight quarters as cost-to-serve fell.
  • Against. $50–65B of incremental annual depreciation lands in FY26 from FY25 capex, on top of a server-life cut from 6 back to 5 years that admits AI gear obsolesces faster than management's own 2024 estimate. AWS 35% margin has not been tested at this depreciation intensity.
  • Against. Strip the Anthropic mark, the DPO stretch, and the cash-tax windfall and FY25 EBITDA is 10–12% lower — the cheap-multiple narrative collapses to an in-line print. A $2.5B FTC settlement on Prime dark patterns and a separate September 2025 federal ruling on Prime billing add an open consumer-protection liability.
My view — own the franchise, size the conviction. Verdict flips to lean long outright on Q2 or Q3 prints with AWS segment margin ≥35%, consolidated op margin ≥10%, and DPO holding above 108 days; flips to avoid if AWS margin compresses below 30% in any FY26 quarter or the next Anthropic mark prints down.

Watchlist to re-rate: AWS segment operating margin in the Q2 and Q3 FY26 prints; AP balance and trailing DPO in the late-July 10-Q; the next Anthropic external valuation event in H2 FY26.