With its market cap of $2.63 trillion, Amazon (AMZN 1.34%) is already the fifth-largest company in the world. And with such massive scale, it may be tempting to think the e-commerce giant's days of heady growth are over. That would be wrong. While Amazon's top line is maturing, there is still plenty of room for profitability improvements.
Let's explore three reasons why the stock is still a good buy in 2026 and beyond.
Generative artificial intelligence
While Amazon is well known for its industry-leading e-commerce marketplace, the company's long-term success has depended on its ability to quickly pivot to new synergistic opportunities when they arrive. For example, Amazon's online bookstore helped it create a vast general-purpose e-commerce platform. Running this massive global website gave it the information technology skills and expertise needed to eventually pivot to cloud computing with Amazon Web Services (AWS).
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In turn, AWS has given Amazon a head start in the generative AI industry because it provides the cloud-based infrastructure that other companies need to run and train their AI algorithms. The company has also partnered with a leading large language model (LLM) developer, Anthropic.
This deal benefits Amazon in two key ways. For starters, Amazon owns 15% to 19% percent of Anthropic, and if the value of this equity rises, it represents non-cash income for the parent company. Secondly, Anthropic is obligated to use AWS for its cloud infrastructure needs, helping boost Amazon's operating income. Anthropic's popularity is surging among enterprise clients with its flagship LLM Claude boasting a market share of 42% for coding use compared to OpenAI's ChatGPT, which has a market share of 21% for this specific use case.
Amazon is deepening its economic moat in AI infrastructure by developing its own custom chips (such as the Graviton4 series). This strategy will allow the company to tailor-make hardware for specific use cases, making AI training and inference more cost-efficient.
Robotics and aggressive cost-cutting
The most exciting aspect of Amazon's AI story is that it isn't limited to servicing other enterprises. The company is also using the technology to improve internal operations. In June, CEO Andy Jassy released a memo saying that he expects generative AI to help Amazon reduce its corporate workforce over the coming years through efficiency gains. And this could naturally lead to better operating margins and profitability.
In 2025, Amazon laid off a whopping 14,000 corporate workers. And while management claims that this was about reducing bureaucracy, it's easy to assume that AI also played a role, considering the memo in June.
Reuters reports that the company may be planning to lay off an additional 30,000 workers in 2026. And if we assume the average corporate worker at Amazon makes $133,062 per year (according to U.S. data from ZipRecruiter), that could add up to cost savings of as much as $4 billion, which could have a meaningful impact on the company's bottom line.
NASDAQ: AMZN
Key Data Points
The cost-cutting probably won't end at Amazon's corporate offices. The New York Times reports that the tech giant may be planning similar moves in its extensive warehouse operations, where it employs a vast number of lower-paid but much more numerous workers. Here, they claim, robotics could help Amazon expand without half a million jobs it would otherwise need by 2033. This move would help the company save money, but also protect it from challenges like high turnover rates.
Amazon's layoffs and job replacements make perfect sense from a business perspective. That said, the company may benefit from slowing things down to preserve employee morale and avoid unwanted political attention.
Amazon stock is a buy
With a forward price-to-earnings (P/E) multiple of 30, Amazon's stock trades at a notable premium over the S&P 500 average of 22. But this looks fair considering the company's exposure to generative AI-led growth and profitability improvements by incorporating the technology into its own operations.
