Key Takeaways
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Amazon's P/E has fallen from 34 to 21 over the past year, and its forward P/E of 25x sits near a five-year low.
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AWS grew 39% last quarter, and analysts expect normalized EPS to nearly double by 2028.
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The risk is cash: free cash flow was a $34.8 billion outflow in the third quarter, and analysts expect it to stay negative through 2027.
The Nov. 5 tech sell-off hit anything tied to data centers, and few companies are building more of them than Amazon ( AMZN:NASDAQ ).
One panelist on CNBC's Halftime Report said the selling overshot: "Amazon is at the cheapest it's been, frankly, in years and years and years."
He has a point. Amazon's P/E has fallen from 34 to 21 over the past year, according to Creative Planning's Charlie Bilello, even as AWS grows at what CEO Andy Jassy called " our fastest growth in nearly five years ."
Priced for the Spending
Bilello summed up what changed in a separate post : "Big tech is undergoing a fundamental transformation, shifting from asset-light to asset-heavy business models."
Amazon still expects about $220 billion of cash capital spending this year, up from $128.3 billion in 2025, and spent $75.9 billion in the third quarter , net of sale proceeds and incentives. Most of it goes to AWS, which took 76% of the property and equipment Amazon added in the first half of 2026. The stock has been marked down as the bill has grown.
The Growth Is Still There
AWS revenue grew 39% in the third quarter to $46.0 billion, an annual run rate of about $184 billion. Jassy expects AWS to grow more than 40% in both 2027 and 2028, and its backlog reached $578 billion , more than three years of revenue at today's pace.
Analysts expect that growth to reach earnings, with normalized EPS nearly doubling from $7.17 in 2025 to $13.99 in 2028.
Reported earnings flatter Amazon this year: they include $62.8 billion of pre-tax gains on its Anthropic stake in the first half alone. On the normalized earnings analysts expect over the next 12 months, Amazon trades at 25x.
That's close to the five-year low of 23x it hit on Oct. 30, and about half its five-year average of 48x.
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The Cash Burn Is Real
Free cash flow has been negative for three straight quarters, and the third quarter's $34.8 billion outflow was the biggest in two years.
Analysts expect free cash flow to stay negative through 2027 before turning into a $37.8 billion inflow in 2028. Amazon's debt has climbed to $180.9 billion.
Why Amazon's Spending Should Pay
The capacity already running is earning its keep. Heath Terry, Citi's head of AI research, said on CNBC's Squawk on the Street : "we saw the cash return on cash invested for the hyperscalers already. It was 30% in the most recent quarter."
That's the group, not Amazon alone, but it fits what Amazon said in July: most of its AI capacity is contracted for at least five years, and its servers pay for themselves in a little under three. The negative free cash flow is the next round of capacity being built before it bills.
At 25x forward earnings, with EPS expected to nearly double by 2028, Amazon looks like a buy for anyone who can sit through another year or so of negative free cash flow.
The test comes in early February, when Amazon gives its 2027 capex outlook. Analysts expect $278.2 billion. Guide well above that, and the 2028 cash-flow recovery is at risk.
So What Is Amazon Stock Actually Worth?
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