Amazon stock has underperformed the market, up only 22% in the last five years compared to the S&P 500’s 87% return. Wall Street is concerned about Amazon’s ambitious capital spending plans, potentially leading to negative free cash flow in 2026.

Despite investor skepticism, Amazon’s cloud infrastructure division, AWS, is experiencing high demand from AI start-ups like Anthropic. Last quarter, AWS revenue grew by 24% to $35.6 billion, with an expected acceleration in revenue for 2026 due to increased spending on data center infrastructure.

Although Amazon’s heavy upfront investments may lead to negative free cash flow in 2026, this indicates a significant opportunity for the company to reinvest and expand its revenue base. Operating earnings are growing, reaching a record high of $85 billion over the last 12 months, driven by rising AWS revenue and retail operations.

Once Amazon’s accelerated AI investments are complete, free cash flow should align with operating earnings. By growing consolidated revenue by 15% annually, Amazon could achieve over $1 trillion in revenue by the end of the decade, doubling current profit levels and significantly increasing stock performance.

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Read more at Yahoo Finance: Is Wall Street Wrong About Amazon Stock?