Amazon (AMZN 1.44%) is the world's largest e-commerce and cloud infrastructure company, yet it remains a market-beating growth stock. Over the past three years, its stock has rallied by about 170% as the S&P 500 has risen by less than 80%.
Can Amazon maintain that momentum over the next three years? Let's review its growth engines, catalysts, challenges, and valuations to determine if it's still a worthwhile investment.
Image source: Getty Images.
How does Amazon make money?
Amazon generates most of its revenue from its retail business, which operates dedicated e-commerce marketplaces across more than two dozen countries. It also owns Whole Foods Market and operates a limited number of Amazon-branded brick-and-mortar stores.
However, Amazon generates most of its profits from Amazon Web Services (AWS), the world's largest cloud infrastructure services provider. AWS controlled 32% of the global cloud infrastructure market in the second quarter of 2025, according to Canalys, putting it far ahead of Microsoft's (MSFT 0.48%) Azure (22%) and Alphabet's (GOOG 1.45%) (GOOGL 1.45%) Google Cloud (11%). In the first nine months of 2025, Amazon generated 18% of its net sales and 60% of its operating profit from AWS.
NASDAQ: AMZN
Key Data Points
AWS' higher-margin revenues enable Amazon to expand its subscription-based Prime ecosystem with steep discounts, free shipping options, streaming media services, cheap hardware devices, and other loss-leading strategies. Prime already serves over 240 million paid members, and the stickiness of that ecosystem widens its moat against other retailers.
Amazon also generated 9% of its revenue from its advertising services segment, which sells promoted listings and integrated ads across its marketplace and digital platforms, in the first nine months of 2025. It doesn't break out the segment's operating profits, but it is likely to operate at higher margins than its retail business. Therefore, its advertising business could expand and evolve into its secondary profit engine alongside AWS over the next few years.
What happened to Amazon over the past three years?
In 2022, Amazon's net sales rose by only 9%, its operating margin dropped from 5.3% to 2.4%, and its investment in the struggling EV maker Rivian (RIVN 6.67%) led to a net loss. That slowdown -- which was caused by inflationary headwinds affecting consumer spending and slower cloud spending in a choppy macroeconomic environment -- spooked the bulls.
Yet over the following three years, Amazon's net sales rose by the double digits, its operating margins expanded, and its earnings per share (EPS) surged again. Its retail business recovered as it accelerated its delivery speeds and inflation cooled off. The generative AI boom also drove more companies to increase their spending on cloud infrastructure services.
|
Metric |
2023 |
2024 |
9M 2025 |
|---|---|---|---|
|
Net Sales Growth (YOY) |
12% |
11% |
12% |
|
Operating Margin |
6.4% |
10.8% |
10.9% |
|
Diluted EPS Growth (YOY) |
N/A* |
91% |
42% |
Data source: Amazon. YOY = Year-over-year. *Due to a net loss in 2022.
What will happen to Amazon over the next three years?
From 2024 to 2027, analysts expect Amazon's revenue and EPS to grow at a CAGR of 12% and 20%, respectively. Its stock still looks reasonably valued at 29 times its 2026 earnings.
If Amazon matches those estimates, grows its EPS at a CAGR of 15% through 2029, and still trades at about the same multiple, its stock could rise more than 60% over the next three years. That wouldn't be as impressive as its gains from the past three years, but it could easily outperform the S&P 500's average annual return of about 10%.
Amazon still faces plenty of competition from superstores such as Walmart and Chinese discount marketplaces like PDD's Temu, but its scale, stickiness, and support from its higher-margin AWS and advertising segments should drive its long-term growth. Therefore, I believe Amazon remains an excellent growth stock to buy for 2026 and beyond.
