Amazon Stock Is Up 8% This Year. Is It Still a Buy Ahead of Earnings?

Amazon is set to release its third-quarter earnings report on Oct. 29. Here’s Morningstar’s take on what to look for in Amazon’s earnings and the outlook for its stock.

Key Morningstar Metrics for Amazon

• Fair Value Estimate
  : $300.00
• Morningstar Rating
  : ★★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Medium

Amazon Earnings Release Date

• Thursday, Oct. 29, 2026, after the close of trading

What to Watch for in Amazon’s Q3 Earnings

• AWS growth and margin. AWS grew 37.0% last quarter with a 39.4% margin, so the bar sits near the high 30s. That partly reflects non-depreciation costs falling in a sold-out market, while depreciation rose 67%. We’ll see whether growth holds in the mid-30s or better, and how much of the margin survives rising depreciation.
• Capex and the path to free cash flow. The 2026 capex guide is about $220 billion, raised $20 billion in July on higher memory prices, rather than added capacity. Reaching it requires roughly $61 billion a quarter in the second half. A sixth consecutive raise wouldn’t be surprising, so we’ll look at whether it buys capacity or just cost. Trailing free cash flow is slightly negative, and capex should also step up once the firm begins capitalizing its Leo satellite costs.
• Operating income guide, with Prime Day noise. Amazon guided to $22.5 billion-$26.5 billion operating income on $197.0 billion–$202.0 billion of sales. Operating income has beaten the top of the range in each of the last eight quarters once the excluded charges are removed. Sales growth is held back by about 4 points because Prime Day moved into the second quarter. A key data point will be this operating income cadence and whether another beat is baked into that. That will all likely be driven by trends in AWS and capex.

At about $262 per share, the stock trades roughly 16%–17% below our $300 fair value estimate, a modest discount for a wide-moat business. We’ll be looking for incremental evidence regarding the ROI of AI investments, as it all comes down to what that $220 billion in capex is buying Amazon in future earnings power.

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

Fair Value Estimate for Amazon

With its 4-star rating, we believe Amazon’s stock is moderately undervalued compared with our long-term fair value estimate of $300 per share, which implies a 2026 enterprise value/sales multiple of 4 times and a negative 1% free cash flow yield.

Over the long term, we expect e-commerce to continue to take share from brick-and-mortar retailers. We further expect Amazon to gain share online. We also see international as a longer-term opportunity within retail. We believe the critical growth drivers over the medium term will be AWS and advertising. Since these segments earn materially higher margins than the rest of the business, we also expect them to drive margins higher over time.

Read more about Amazon’s fair value estimate.

Economic Moat Rating

We assign a wide moat rating to Amazon based on network effects, cost advantages, intangible assets, and switching costs.

We believe Amazon’s retail business has a wide moat stemming from network effects associated with its marketplace where more buyers and sellers continually attract more buyers and sellers; a cost advantage tied to purchasing power, logistics, vertical integration, and a negative cash conversion cycle; and intangible assets associated with technology and branding.

We also believe AWS is a wide-moat business, thanks to high customer switching costs; a cost advantage associated with economies of scale; intangible assets arising from semiconductor and facility development; and a network effect associated with a marketplace for software created to make AWS work better for them.

We would also assign Amazon’s advertising business a wide moat based on intangible assets from its proprietary data on hundreds of millions of users and a network effect again focusing on buyers and sellers meeting in the largest available venues.

Finally, we believe the wide moat for Amazon’s entire business is greater than the sum of its parts, and we prefer to analyze its moat on the whole, as its segments reinforce one another and returns result in an unrivaled consumer experience.

Read more about Amazon’s economic moat.

Financial Strength

We believe Amazon is financially sound. Revenue is growing rapidly, margins are expanding, the company has unrivaled scale, and the balance sheet is in great shape.

As of Dec. 31, 2025, Amazon had $123.0 billion in cash and marketable securities, offset by $65.6 billion in debt. We also expect free cash flow generation, which is pressured in the near term by heavy capital expenditure investments for AWS, to return to more normal levels as this current investment cycle eases.

Read more about Amazon’s financial strength.

Risk and Uncertainty

We assign Amazon an Uncertainty Rating of Medium. The company must protect its leading online retailing position, which can be challenging as consumer preferences change and traditional retailers bolster their online presence.

Continued international expansion will increase exposure to different regulatory environments. Domestically, lawmakers have increasingly focused on the amount of market power large technology companies have accrued.

From an environmental, social, and governance perspective, data breaches and service outages are a concern for any type of cloud service provider. As a retailer, Amazon has personal information for hundreds of millions of consumers around the world, while AWS hosts proprietary mission-critical data for enterprises.

Read more about Amazon’s risk and uncertainty.

AMZN Bulls Say

• Amazon is the clear leader in e-commerce and enjoys unrivaled scale to continue investing in growth opportunities and drive the best customer experience.
• High-margin advertising and AWS are growing faster than the corporate average, which should continue to boost profitability over the next several years.
• Amazon Prime memberships help attract and retain customers who spend more with Amazon. This reinforces a powerful network effect while bringing in recurring and high-margin revenue.

AMZN Bears Say

• Regulatory concerns are rising for large technology firms, including Amazon. The firm may face increasing regulatory and compliance issues as it expands internationally.
• New investments—notably in fulfillment, delivery, and AWS—should dampen free cash flow growth. AWS investments for AI have been substantial and are likely to remain elevated for several years.
• Amazon may not be as successful in penetrating new retail categories, such as luxury goods, due to consumer preferences and an improved e-commerce experience from larger retailers. The same applies to international expansion.

This article was compiled by Colin Laidley.