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Amazon is sparing no expense when investing in AI-related infrastructure, especially when AWS demand is strong.
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Digital advertising should continue to be a major growth driver next year.
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The stock’s EV-to-EBIT ratio is near a decade low, which can provide near-term upside.
It’s not like Amazon (NASDAQ: AMZN) 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.
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.
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.
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.
