Still Time to Chase the Rebound in Amazon Stock?
With investor sentiment turning positive again amid a ceasefire between the U.S and Iran, Amazon AMZN) stock has led the rebound in the broader market, spiking nearly 15% so far this month.
The resurgence in Amazon stock has been driven by strong underlying business performance and renewed optimism about AWS and AI-related demand.
Analysts have argued that Amazon’s stock was oversold, with the initial overreaction triggered by a small Q4 earnings miss back in February and a big jump in planned capital expenditures (CapEx).
Still, Q4 sales of $213.38 billion edged expectations, and the slight earnings miss was caused by $2.4 billion in special charges that temporarily suppressed quarterly EPS ($1.95 versus expectations of $1.98).
As that context sinks in, buyers are stepping back in, but is it still time to chase the rebound in Amazon stock?
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AI Workloads Drive AWS Acceleration
AWS remains Amazon’s profit engine, with demand for cloud services and AI capacity surging. Correlating with this, Amazon is massively expanding its data-center infrastructure as customers are asking for more AI compute. Investors are now starting to view this spending as a long-term growth investment rather than a margin threat.
Notably, Amazon CEO Andy Jassy has stated that the company plans to spend $200 billion in CapEx this year, driven largely by AI-related AWS infrastructure. This comes as AWS revenue spiked 24% year over year in 2025 to $128.7 billion, its fastest pace in more than three years.
Advertising & Subscription Optimism
Another underlying catalyst for renewed optimism is that Amazon’s ad business is now one of the largest in the world and is growing at double-digit rates. Subscription revenue (Prime, digital content) is also rising steadily. These higher-margin segments offset the lower margins in Amazon’s e-commerce business and have strengthened the bullish narrative.
Amazon’s Strong Balance Sheet
Although Amazon will likely rely on significant debt financing to support its massive 2026 CapEx plan, the tech giant has remained a cash cow, having over $123 billion in cash and equivalents.
Bolstering Amazon’s balance sheet and its capacity to increase its debt load is the fact that it holds $818 billion in total assets, which is nicely above its total liabilities of $406.97 billion.
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Tracking the Trend of EPS Revisions
Based on Zacks estimates, Amazon’s annual earnings are expected to increase 8% this year to $7.78 per share from EPS of $7.17 in FY25. More intriguing, FY27 EPS is projected to spike another 20% to $9.32.
Over the last 60 days, FY26 EPS revisions are slightly up from estimates of $7.76. However, FY27 EPS estimates have dipped slightly from projections of $9.33 two months ago.
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Conclusion & Strategic Thoughts
Although it’s tempting to chase the rebound in Amazon stock, AMZN currently lands a Zacks Rank #3 (Hold). A more favorable trend of EPS revisions will be needed to spur a buy rating after the latest surge. That said, the argument for long-term value is definitely apparent, as Amazon’s stock is still trading near historic lows in terms of its forward P/E valuation at 30X.
Furthermore, Amazon is starting to create a pathway toward what will likely be annual revenue of $1 trillion by 2030, with its top line expected to expand by over 10% annually for the foreseeable future after posting revenue of $716.92 billion last year.
There could be better buying opportunities ahead, but AMZN has remained one of the most appealing growth stocks to keep in the portfolio, attributed to accelerating demand for cloud services and AI capacity.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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