It has been a disappointing year for Amazon's (AMZN 0.74%) stock so far. It's trading essentially flat through Sept. 30. In contrast, the S&P 500 and Nasdaq Composite are up 13% and 16.7%, respectively. Despite its underperformance in 2025, Amazon remains poised to be a strong investment going forward.
There are no guarantees in the stock market, but the same thing that has disappointed investors will likely be the same thing that stages Amazon's comeback: Its cloud services platform, Amazon Web Services (AWS).
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Investors have been disappointed with AWS' growth compared to other platforms like Microsoft's Azure and Alphabet's Google Cloud. In my opinion, the issue is more the lofty expectations placed on AWS amid artificial intelligence (AI) hype and optimism versus AWS' performance. In its most recent reported quarter, AWS' revenue increased 17.5% year over year to $30.9 billion, which isn't too shabby.
Amazon is rightly playing the long game with AWS, making heavy investments in AWS and AI infrastructure. It's building new data centers, designing its own AI chips (reducing its reliance on Nvidia), and expanding its overall networking capacity. These investments have temporarily shrunk AWS' margins, but they should pay off in the long term.
NASDAQ: AMZN
Key Data Points
The global AI market is expected to explode in the next few years, with much of that being enterprises spending on cloud infrastructure and specialized AI tools. Enterprises looking to build and integrate AI products into their businesses need high computing power, secure data storage, and ready-to-go tools that make launching faster -- and Amazon is making sure AWS is the one-stop shop that can provide these.
At its size, a slowdown in growth in AWS was all but inevitable at some point. However, even if it loses some market share, the overall pie is expected to grow large enough that it will still have a tangible effect on Amazon's business.
