It's not like Amazon (AMZN +0.21%) to trail the overall market. However, with shares up 2% this year (as of Dec. 17), investors should ask what's going on. Amazon is dealing with competitive forces, regulatory issues, and macro headwinds. But it's easy to be optimistic.
Here are some of the most important catalysts and factors that investors need to watch as attention turns to 2026.
Image source: Amazon.
Amazon's AI-related spending is sizable
Amazon is known as a hyperscaler because it's spending significant sums of money on artificial intelligence (AI) efforts. Management forecasts $125 billion in capital expenditures (capex) this year for things like building data centers and developing chips. That figure will likely increase next year.
Peers like Microsoft and Alphabet are spending ridiculous amounts on expanding their AI infrastructure as well. Amazon must keep up, or risk getting left behind in what could be a revolutionary technology shift.
Macro and industry forces can't be overlooked. AI bubble fears are swirling. If pessimism becomes prevalent, all this spending will be ill-timed, and investors will lose confidence in companies like Amazon that will likely be most affected.
AWS' success is critical to the overall business
A lot of that capex relates to Amazon Web Services (AWS), the company's industry-leading cloud computing platform. It's a major financial contributor, with third-quarter revenue of $33 billion and operating income of $11.4 billion. In 2026, AWS should remain top of investors' minds.
AWS has received a boost from strong customer interest in leveraging AI tools in their own operations. OpenAI is a notable customer, and Nvidia is a longtime partner. AWS' ongoing success should lift Amazon's financial results in 2026.
NASDAQ: AMZN
Key Data Points
Digital advertising revenue is soaring
During the last quarter, Amazon's digital advertising revenue jumped 22% year over year to $17.7 billion. The company is deserving of a seat at the table with industry heavyweights Alphabet and Meta Platforms. Amazon's online marketplace provides a valuable marketing channel for merchants. Its popular streaming platform, Prime Video, is another avenue to monetize viewer attention.
Unless there's a severe recession, expect digital ad revenue to keep rising meaningfully next year.
There might be valuation upside
For a business that has a huge market cap of $2.4 trillion, it can be surprising to see a cheap valuation. Amazon shares currently trade at an enterprise value (EV) that's 30.5 times its earnings before interest and taxes. This level is near its lowest ratio in the past decade.
In 2026, valuation expansion might be a key driver of investor returns. Market sentiment can improve with strong financial results. This tailwind could be a catalyst in the near term.
