Amazon is set to release its first-quarter 2026 earnings report on April 29. Here’s Morningstar’s take on what to look for in Amazon’s earnings and the outlook for its stock.
Key Morningstar Metrics for Amazon
- : USD 260.00Fair Value Estimate
- : ★★★Morningstar Rating
- : WideMorningstar Economic Moat Rating
- : MediumMorningstar Uncertainty Rating
Amazon Earnings Release Date
- Wednesday, April 29, after the close of trading
What to Watch for in Amazon’s Q1 Earnings
- We’re keeping an eye on Amazon Web Services’ growth, backlog, and capacity additions. AWS is the story, and artificial intelligence is driving it. Amazon doesn’t provide a wealth of data, so any data point is helpful for our predictions, such as capacity adds, utilization, or projects being on, ahead of, or behind schedule.
- We expect some depreciation in AWS margins, which is notable, as its profitability drives Amazon’s overall profitability. Margin improvements based on efficiency gains have been a major theme for Amazon for the last year, and we expect more to come.
- Leo (formerly Project Kuiper) expenses have been ramping up and weighing on margins, as they did for first-quarter guidance.
- CEO Andrew Jassy commented on the chip business in a shareholder letter, so we’ll be looking for more discussion around that.
- We’re looking for updates on the USD 200 billion capital expenditure outlook for 2026.
- We expect discussion of the just-announced deal to acquire Globalstar, Amazon’s grocery business (which the company entered more meaningfully during the third quarter of 2025), expansion efforts for next-day delivery to rural areas, news about Alexa being made available on non-Amazon devices, and the recent reduction of 14,000 corporate employees.
Fair Value Estimate for Amazon
With its 3-star rating, we believe Amazon stock is fairly valued compared with our long-term fair value estimate of USD 260 per share, which implies a 2026 enterprise value/sales multiple of 3 times and a negative 1% free cash flow yield. We note that the free cash flow yield is constrained by the significant AWS capacity expansion underway. Over the next five years, we project AWS revenue growing at a 19% CAGR and advertising revenue growing at a 21% CAGR. In total, Amazon should grow at an 11% CAGR through 2030.
Read more about Amazon’s fair value estimate.
Economic Moat Rating
We assign a wide moat rating to Amazon based on network effects, cost advantages, intangible assets, and switching costs. We believe Amazon’s retail business, advertising business, and AWS each have wide moats, driven by its massive scale and varied offerings of content subscriptions, original technology, and third-party products. We think many of these areas reinforce one another and see little difficulty in Amazon continuing to deliver returns on invested capital well in excess of its cost of capital over the long term.
Read more about Amazon’s economic moat.
Financial Strength
We believe Amazon is financially sound. Revenue is growing rapidly, margins are expanding, the company has unrivaled scale, and the balance sheet is in great shape. As of Dec. 31, 2025, Amazon had USD 123.0 billion in cash and marketable securities, offset by USD 65.6 billion in debt. We also expect free cash flow generation to be pressured in the near term by heavy AWS investments. As the current investment cycle eases, we see a return to more normal cash flow generation.
Read more about Amazon’s financial strength.
Risk and Uncertainty
We assign Amazon an Uncertainty Rating of Medium. Amazon must protect its leading online retailing position, which can be challenging as consumer preferences change, as well as its value proposition for third-party sellers.
The company must also continue to invest in new offerings. AWS, transportation, and physical stores (both Amazon-branded and Whole Foods) are three notable areas of investment. AI investments for AWS were substantial in 2025 and will remain so in 2026, for example. Continued international expansion will also increase exposure to different regulatory environments, including those with protectionist policies. Even domestically, bipartisan lawmakers have increasingly focused on the amount of market power large technology companies have accrued.
From an environmental, social, and governance perspective, data breaches and service outages are a concern for any cloud service provider. As a retailer, Amazon has personal information for hundreds of millions of consumers worldwide, while AWS hosts proprietary mission-critical data for enterprises.
Read more about Amazon’s risk and uncertainty.
AMZN Bulls Say
- Amazon is the clear leader in e-commerce and enjoys unrivaled scale to continue investing in growth opportunities and drive the very best customer experience.
- High-margin advertising and AWS are growing faster than the corporate average, which should continue to boost profitability over the next several years.
- Amazon Prime memberships help attract and retain customers who spend more with Amazon. This reinforces a powerful network effect while bringing in recurring and high-margin revenue.
AMZN Bears Say
- Regulatory concerns are rising for large technology firms, including Amazon. The firm may face increasing regulatory and compliance issues as it expands internationally.
- New investments—notably in fulfillment, delivery, and AWS—should dampen free cash flow growth. AWS investments for AI have been substantial and are likely to remain elevated for several years.
- Amazon may not be as successful in penetrating new retail categories, such as luxury goods, due to consumer preferences and improved e-commerce experiences at larger retailers. The same applies to international expansion.
This article was compiled by Jillian Moore.
