Stock investing entails different strategies, but the goal remains simple. For instance, whether you pursue growth or dividend-paying stocks, you hope to make money. Of course, you have to take your risk tolerance into account.
Amazon (AMZN 1.52%) has made investors a lot of money over the years, but its recent performance has been lackluster. Over the last year, which ended on Feb. 5, the stock lost 8.2% compared to the S&P 500's (^GSPC 1.52%) 16.5% return.
Can the shares reverse course, making this a good long-term investment?
Image source: Getty Images.
Investing for growth
Amazon has three segments: North America, international, and Amazon Web Services (AWS). The first two include a wide range of activities, like online selling, physical stores, devices (e.g., Echo), and advertising.
The North America and international segments produce the majority of the company's sales. They accounted for 82% of Amazon's $716.9 billion sales in 2025. However, they had $34.7 billion in operating income, or 43% of the total.
These businesses are doing fine, growing sales and profit year over year. However, AWS, its cloud-computing business, remains Amazon's largest profit generator. The business grew operating income 14.5% to $45.6 billion.
NASDAQ: AMZN
Key Data Points
With organizations clamoring for data and the large resources needed to build and maintain data centers, AWS has a competitive advantage. In fact, the business has the leading market share, 30% as of mid-2025, compared to 20% for Microsoft's Azure and 13% for Alphabet's Google Cloud.
With the advent of generative artificial intelligence (AI), the business' growth could accelerate.
The sell-off and valuation
Despite strong sales and profit growth, investors sent the stock down following the company's fourth-quarter earnings release on Feb. 5. That's because management outlined plans to boost capital expenditures to $200 billion this year.
That's significantly higher than 2025's $131.8 billion. And Amazon will outspend its operating cash flow unless there's a marked increase from the $139.5 billion generated last year.
However, this shouldn't concern long-term investors. Management believes this will produce a significant return on capital, which would benefit shareholders. After all, Amazon has unique opportunities, including building data centers to meet AI demand.
With the shares trading at a price-to-earnings (P/E) ratio of 28, down from 40 a year ago, the valuation has become more attractive. Over 10 years, Amazon has a median P/E multiple of 82. It also has a better valuation than the S&P 500, which has a P/E ratio of 30.
Of course, the question is, will you be better off investing in Amazon or an index fund, such as one replicating the S&P 500? While short-term stock price movements are difficult to predict, I believe investors have the opportunity to make more by purchasing Amazon's stock based on its valuation and growth prospects.
