Revenue Expansion and Segment Shifts Are Reshaping the Core of NASDAQ:AMZN
Amazon's journey through FY 2024 reflects the strategic reshaping of a trillion-dollar machine. Despite a 15% decline from its February 2025 all-time high, the drop in NASDAQ:AMZN stock price is not a reflection of deteriorating fundamentals but a sign of market impatience. While short-term sentiment has been hurt by soft Q1 2025 guidance and heightened geopolitical risks, the numbers tell a different story. Revenue growth across the last five years averaged 22% CAGR from 2015 to 2024, tapering slightly to 18% CAGR between 2020 and 2024, but this moderation comes after more than doubling total revenue since 2019. North America, which remains the revenue backbone at 62% of total net sales, has experienced a natural deceleration, yet continues to grow and improve its margins. AWS, now representing 15% of total sales, is emerging as the structural profit engine.
Profitability Gains Led by AWS and Logistics Efficiency
FY 2024 marked a historic year in Amazon’s profit structure. NASDAQ:AMZN posted a company-wide operating income margin of 10.8%, powered heavily by the record-breaking 37% margin posted by AWS. That operating strength cascaded into a 19% EBITDA margin and delivered a staggering $115.9 billion in operating cash flow—an all-time high. Meanwhile, the North America e-commerce segment reached 6.4% in margin, a considerable improvement driven by a two-year decline in per-unit delivery costs. Amazon has reengineered its last-mile network, reduced packaging waste, and increased package consolidation rates, leading to a structurally lower cost-to-serve globally.
International operations, previously a drag, turned profitable in 2024 with a 2.7% operating margin. That pivot changes the conversation about Amazon’s overseas strategy. It is no longer about future profitability—it is about margin scaling and competitive dominance in those regions.
Capital Spending is a Signal of Conviction, Not Weakness
Spending $26.3 billion in capital investments in Q4 2024 alone might look aggressive to the uninformed, but the data reveals a different picture. The majority of that capital was allocated to technology infrastructure, particularly to expand AWS and to support AI workloads. This is not discretionary capex—it is a foundational build-out for long-term margin expansion. Amazon expects this capex pace to continue into 2025, focusing on cloud computing, robotics, and infrastructure in both the North America and International segments. Markets that fail to understand this reinvestment strategy continue to misprice Amazon’s intrinsic value. The current forward EV/EBITDA of 13.3x is far below peers, unjustified for a company compounding free cash flow at this velocity.
Advertising and Prime Ecosystems Are Hidden High-Margin Engines
Beyond AWS, Amazon's advertising segment delivered 18% year-over-year growth in Q4 2024, reaching $17 billion in quarterly revenue. It is now the second most profitable segment after AWS. With the rise of first-party retail media and Amazon's control over consumer data, this ad business has quietly become a margin booster. Prime delivery performance also improved dramatically in 2024, with Amazon achieving its fastest delivery speeds ever for Prime members during the holiday season. This is not an anecdote—it’s a clear result of operational investments in robotics, machine learning, and same-day fulfillment centers.
Valuation is Severely Disconnected from the Fundamentals of NASDAQ:AMZN
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With a market cap of $2.25 trillion and an enterprise value of $2.3 trillion, Amazon’s current net debt sits at just $54 billion—calculated as $155 billion total debt minus $101 billion in cash. This leaves the balance sheet in a healthy state despite aggressive capex. At a forward P/E of 34x and projected EPS growth of 15% to 20%, NASDAQ:AMZN is trading at a PEG ratio between 1.7 and 2.3. For a company with Amazon’s market dominance, that ratio is cheap. Peter Lynch’s fair PEG yardstick would make this a textbook GARP investment.
Over the past five years, free cash flow per share has grown by 22.5% annually. Earnings per share, excluding non-recurring items, grew by nearly 28% in that same period. Given these figures, it's clear that the current valuation undervalues the consistent earnings power Amazon generates. The street average is now looking for nearly 30% upside on the back of these metrics.
Future Guidance and the Near-Term Revenue Drag
Looking ahead to Q1 2025, management guided for revenue growth in the range of 5% to 9% year-over-year. While this appears soft, it includes a $2.1 billion negative currency impact—equal to 150 basis points. Moreover, Q1 2024 benefited from an additional $1.5 billion in sales due to the leap year, distorting year-over-year comparisons. Adjusting for these, core growth remains solid and in line with expectations given Amazon’s scale.
The future for AWS remains robust. As of Q4 2024, AWS already processes massive AI inference workloads and management envisions a future in which every software application is layered with AI agents and most corporate workflows are built on cloud infrastructure. AWS is not just a cloud provider—it is becoming the platform layer for the next generation of enterprise computing.
Automation, Robotics, and Drone Infrastructure Are Pushing Amazon into a New Cost Paradigm
Amazon's MK30 drone, now active in Tolleson, Arizona, doubles the range of previous models and drops off lightweight packages within an hour. Robotics in fulfillment centers are accelerating productivity, projected to rise 25% at next-gen facilities. Amazon is not talking about automation—it’s executing at scale. Thousands of robots are already embedded in its warehouses, driven by real-time sensor data processed by AWS. This isn’t aspirational—it’s operational and it’s working.
Risks Are Present but Limited in Scope
The Trump-era tariffs could introduce pricing friction. An estimated 2.1% to 2.6% increase in consumer prices on goods sold through Amazon is possible due to new tariffs. But this risk affects all retailers, and Amazon’s scale could actually allow it to gain share if it absorbs cost inflation better than competitors. Moreover, international operations have proven they can cross into profitability, providing a margin buffer in regions that were previously seen as financial drags.
Stock-Based Compensation and Insider Activity Raise Some Flags but Are Stabilizing
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Stock-based compensation came in at $22 billion for the year, nearly one-third of Amazon’s annual net income. However, dilution has slowed. Outstanding shares are only increasing marginally, and headcount has stabilized after peaking in 2022. Efficiency gains are obvious—revenue per employee is now significantly higher than it was two years ago, supported by automation and better logistics architecture. Insider activity remains neutral, with no major buying or selling patterns of note. The executive bench appears to be holding steady on their equity positions, a sign of long-term confidence. The SBC trend is moving in the right direction, and buybacks remain a possibility as net income continues to rise.
AMZN Is Fundamentally Mispriced and Operationally Strong
The notion that Amazon has peaked is divorced from its financial performance. In 2024, the company posted record sales, record net income, record cash flow, and expanding margins across every meaningful segment. AWS is not slowing—it is accelerating its profit contribution. Advertising is becoming a core cash engine. E-commerce margins are rising. International is no longer a loss-maker. Robotics and AI are turning Amazon’s logistics into a competitive fortress. And the market is still attaching a PEG under 2, with a forward EV/EBITDA ratio of just 13.3x.
NASDAQ:AMZN is not just a hold—it is a clear buy. And the recent pullback below $200 per share is not a red flag. It’s a pricing error from a market that continues to underestimate the structural changes reshaping Amazon’s cost base, margin profile, and revenue mix. With double-digit EPS growth likely to continue and cash flow scaling year over year, the company remains significantly undervalued. The decision is not complicated. NASDAQ:AMZN is a strong buy.
