Portfolio: Zacks Bull Tilt

Amazon is a compounding capital allocator with commanding dominance in cloud infrastructure and expanding AI monetization, positioned for exceptional long-term value creation despite near-term margin pressures. AWS generates 60% of operating profit on just 18% of revenue at a run-rate of over $120B annual recurring revenue (ARR), representing +20% YoY growth. While this recent growth trails Azure and Google Cloud, AWS’s competitive moat remains formidable: 30% global market share and $200B committed backlog. The key constraint is supply, not demand—Amazon deployed $125B capex in 2025 and plans higher spending in 2026 to address AI capacity shortages.​

However, the major thesis revolves around the company’s AI monetization efforts, which we believe are at an inflection point, combined with the lowest valuation multiples in 5+ years. AWS added 3.8 gigawatts of power over 12 months and will double capacity by 2027. The $50B US government AI/supercomputing investment (breaking ground 2026) provides revenue visibility and strategic moat expansion. AWS’s custom silicon (Trainium) saw 150% QoQ growth, underpinning margin expansion. Anthropic’s $8B equity stake plus in-house Nova models position AWS to capture enterprise AI workloads more cost-efficiently than rivals.​

Meanwhile, current forward P/E rests at under 29x while EV/EBITDA sits at under 12x – both hovering near 5-year lows despite AWS operating margin expansion with effective AI execution described above. This could drive significant earnings leverage and why we are bullish at today’s prices.