Amazon Shares Are Up 10% Since Earnings. Is the Stock a Buy?

Amazon released its third-quarter earnings report on Oct. 29. Here’s Morningstar’s take on Amazon’s earnings and stock.

Key Morningstar Metrics for Amazon

• Fair Value Estimate
  : $280.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : High

What We Thought of Amazon’s Q3 Earnings

Amazon’s third-quarter revenue rose 12% to $202 billion, and operating margin reached 13.9%. Updated guidance was roughly in line with expectations. Shares were swept up in a broad tech selloff following the results, but have since rebounded about 10%.

Why it matters: We would characterize Amazon’s earnings as pretty good overall, although the reality of exactly how much cash the artificial intelligence buildout is going to cost is becoming more noticeable.

• Amazon Web Services grew 39%, an acceleration from 37% last quarter, and management expects growth above 40% in both 2027 and 2028. These are solid results. However, everyone remains worried about the cost of this growth.
• Capital expenditures were reiterated at $220 billion for the current year, with 2027 levels now characterized as “meaningfully more” than 2026. While the step-up wasn’t unexpected, it was incrementally more explicitly aggressive.

The bottom line: We lowered our fair value estimate to $280 per share from $300 for wide-moat Amazon as we transfer coverage. We meaningfully raised our revenue and earnings per share forecasts as we remodeled capex and AWS growth (both higher) and raised the capital intensity of our long-term forecasts.

• Higher capital intensity is the main driver of the negative valuation revision, as we assume returns on invested capital are range-bound in the midteens. This push and pull between higher capital intensity and higher growth is the key tension between bulls and bears today.

The following are excerpts from Morningstar’s company report on Amazon.

Fair Value Estimate for Amazon

With its 3-star rating, we believe Amazon’s stock is fairly valued compared with our long-term fair value estimate of $280 per share. We expect Amazon’s revenue to compound about 16% annually from 2025 through 2030, with AWS providing most of the acceleration. Demand for artificial intelligence infrastructure and its associated cloud services supports our forecasts for AWS revenue growth of 45% in 2027 and 41% in 2028, before slowing to 20% in 2030.

Read more about Amazon’s fair value estimate.

Economic Moat Rating

We assign Amazon a wide moat based on network effects and cost advantages in its retail marketplace and switching costs and cost advantages in AWS. We have very high confidence that these franchises can maintain excess returns for the next decade and believe they are more likely than not to do so for at least 20 years. The substantial increase in investment required for AI makes the return on new capital less certain, but we still see enough of a buffer and have enough confidence in the AI buildout in general to award Amazon a wide moat.

The main threats are a continued deterioration in returns on AI investment and a loss of Amazon’s ability to profit from shopping traffic. AI developers can use multiple computing suppliers, making new capacity less protected than deeply embedded enterprise applications. Shopping agents and restrictions on advertising practices could also weaken marketplace monetization. A persistent failure to earn the cost of capital on new capacity, combined with weakening marketplace economics, would challenge our wide moat assessment, but that is not currently our base case.

Read more about Amazon’s economic moat.

Financial Strength

We consider Amazon financially sound, although its investment program has reduced the cushion provided by cash reserves. As of September 2026, cash and marketable securities were about $114 billion while long-term debt was $173.1 billion, up from $65.6 billion at Dec. 31, 2025. That puts Amazon in a net debt position of at least about $59 billion on long-term debt alone.

The big pressure emerging is Amazon’s purchases of property and equipment, largely tied to data center buildouts for AWS. This has turned free cash flows negative in 2026, and we expect they will remain negative in 2027. If AI demand begins to fade, we believe the company can reduce capital expenditures, which we currently project will peak as a percentage of revenue in 2027.

Read more about Amazon’s financial strength.

Risk and Uncertainty

We assign Amazon a High Uncertainty Rating. Its established shopping and cloud franchises provide a broad earnings base, but the scale of AI investment and the sensitivity of advertising profits create substantial uncertainty around future cash flows.

The largest risk is committing to computing capacity whose eventual returns fall short. Advertising faces legal and technological risks. The Federal Trade Commission and US states have challenged Amazon’s advertising-auction practices, alleging undisclosed surcharges. These allegations remain contested. Remedies that change auction pricing or seller access could reduce monetization of existing traffic. Separately, shopping agents could shift product discovery away from sponsored search results, leaving Amazon with fulfillment activity but less advertising revenue.

Read more about Amazon’s risk and uncertainty.

AMZN Bulls Say

• AWS can turn demand for AI computing into durable earnings as new capacity comes online and custom chips improve cost efficiency.
• Faster delivery and more frequent grocery purchases can expand Amazon’s shopping audience, supporting seller services and advertising growth.
• As capital expenditure growth peaks, operating cash flows will keep rising as the current wave of AI investments pays off.

AMZN Bears Say

• AI equipment may become obsolete or face falling rental prices before Amazon earns an adequate return on its infrastructure investment. A lot rides on future AI demand.
• Advertising remedies or shopping agents that bypass sponsored search could reduce the profit Amazon earns from marketplace traffic.
• Investments in AI developers expose Amazon to both their financing needs and their demand for AWS, while satellite and autonomous-driving projects add further calls on cash.

This article was compiled by Colin Laidley.