At BE Invested Labs we agree with the main point: Amazon’s earnings power is still probably underappreciated.
The cleanest part of the thesis is the profit mix. AWS grew 28% in Q1 2026 and produced $14.2B of operating income. Advertising is now above $70B in TTM revenue. Those two businesses change how Amazon should be valued.
Retail still matters, but mostly because it gives Amazon the customer relationship, seller base, Prime engagement, ad inventory, and logistics density. The margin expansion case comes from the higher-margin businesses becoming a larger part of the whole company.
The main issue is capex. Free cash flow has collapsed to around $1.2B TTM because Amazon is spending heavily on AI infrastructure. I don’t think that automatically weakens the thesis, but it raises the proof needed. AWS growth, AWS margins, ad growth, and future FCF recovery need to confirm that the AI spend is earning real returns.
From our reports and point of view: Amazon remains one of the highest-quality businesses in the market, but the next phase depends on converting AI infrastructure spending into cash flow.
Great company. Strong setup. The next few quarters need to prove the capex is worth it.
At BE Invested Labs we agree with the main point: Amazon’s earnings power is still probably underappreciated.
The cleanest part of the thesis is the profit mix. AWS grew 28% in Q1 2026 and produced $14.2B of operating income. Advertising is now above $70B in TTM revenue. Those two businesses change how Amazon should be valued.
Retail still matters, but mostly because it gives Amazon the customer relationship, seller base, Prime engagement, ad inventory, and logistics density. The margin expansion case comes from the higher-margin businesses becoming a larger part of the whole company.
The main issue is capex. Free cash flow has collapsed to around $1.2B TTM because Amazon is spending heavily on AI infrastructure. I don’t think that automatically weakens the thesis, but it raises the proof needed. AWS growth, AWS margins, ad growth, and future FCF recovery need to confirm that the AI spend is earning real returns.
From our reports and point of view: Amazon remains one of the highest-quality businesses in the market, but the next phase depends on converting AI infrastructure spending into cash flow.
Great company. Strong setup. The next few quarters need to prove the capex is worth it.
Thanks for sharing!
Yes! Thanks for doing this. It’s one of my biggest holdings.
Of course I’m glad you enjoyed!