Is Amazon Stock a Buy After Its Best Quarter in Years?
Key Points
Amazon (NASDAQ: AMZN) has been a massive growth story for much of its history, but that changed after the pandemic.
Revenue growth slowed to as little as 7% in Q1 2022 as momentum in both the e-commerce business and Amazon Web Services (AWS) stalled. While some of that was due to challenging comparisons with the pandemic era, its revenue growth remained in the low teens for the next few years, as the chart below shows.
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AMZN Revenue (Quarterly YoY Growth) data by YCharts
As you can see from the chart, Amazon’s revenue growth has suddenly accelerated this year, clocking in at 20% in the second quarter, its fastest clip in five years.
Amazon stock spiked to an all-time high on the report, but has since cooled off. So what’s behind the company’s sudden acceleration? Let’s take a look before discussing whether the stock is a buy.
Image source: Amazon.
How Amazon got its growth back
In the second quarter, Amazon reported solid growth in all three of its segments, with North America sales up 16% to $116.2 billion and international sales up 15% to $42.2 billion.
However, AWS was the real star here as revenue grew 37% to $42.2 billion, trending with surging growth across the board for cloud computing, as peers like Microsoft Azure and Google Cloud actually reported faster growth, though AWS is still the largest cloud platform. Its pace in Q2 2026 was its fastest since 2021.
The explosion of AI is driving the surge in AWS’s growth, and the company expects that momentum to continue as it forecast $200 billion in capital expenditures, much of which will go to data centers to run AWS and AI compute.
Similarly, the North America segment posted its fastest growth in nearly four years, though it benefited from the shift in Prime Day to the second quarter, which lifted overall revenue growth by roughly 400 basis points, and North America results were even higher. Advertising also accelerated to 26%, its strongest pace since 2023, a promising sign as advertising is a high-margin business for Amazon.
Finally, international growth of 15% excluding foreign exchange was its fastest pace in that segment since Q1 2021 as it benefited from both the Prime Day shift and investments in newer markets that are starting to pay off.
While the shift in Prime Day certainly played a role in Amazon’s acceleration, it’s also clear that the business is gaining momentum, especially in AWS, and that paid off on the bottom line as well, as operating income in the quarter jumped 43% to $27.5 billion, showing the company is gaining operating leverage.
Is Amazon stock a buy right now?
Amazon stock jumped 15% the day after its earnings report, and tacked on another 5% the following day to reach an all-time high. However, since then, the stock has given up nearly all of those gains, seemingly due to rising interest rates and broader macro concerns.
Amazon’s earnings per share are distorted by equity gains from Anthropic, but normalizing for those, the stock is trading at a similar price-to-earnings ratio as the S&P 500. For a company diversified across e-commerce, cloud computing, digital advertising, and other industries, and with one of the widest economic moats in business, that looks like a great price.
Management called for revenue growth to slow in the third quarter, forecasting 9%-12% growth, or 13%-16% when adjusted for the Prime Day shift. Investors should keep in mind that Amazon’s guidance is often conservative, so it could top that forecast.
Overall, Amazon is executing better than it has in years and is well-positioned to benefit from AI growth. The stock is a clear buy.
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Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
