How Has Amazon’s Story Changed

For questions about this article or underlying research, email [email protected].

Amazon.com (AMZN) stock is priced at about 25 times its operating income over the past twelve months, compared with about 17 times for the S&P 500. Anyone paying that price should understand what they are buying, and management has shifted its talking points. During the fiscal Q4 2024 call in February 2025, management made the case for the regionalization of its US delivery network. They last made that case in February 2026, and the network no longer gets the same emphasis. So where has that emphasis gone?

Amazon's Emphasis Has Moved To AWS

Management has shifted its focus to Amazon Web Services (AWS), the company's cloud computing business. During the fiscal Q3 2026 call on October 29, 2026, management said AWS growth sped up for the sixth straight quarter, adding that it believes AWS can grow north of 40% in each of 2027 and 2028.

Regionalization was about the stores side of Amazon, dividing the US network into regions to position items closer to the customers ordering them. On the fiscal Q4 2024 call, management said Amazon had lowered its global cost to serve per unit. A year later, during the fiscal Q4 2025 call, management said regionalization had led to faster delivery and lower costs.

The delivery network still comes up on earnings calls, but in different terms. Management said on the latest call that Amazon had doubled its fleet of robotic arms in 2026. The regions themselves no longer receive that emphasis.

How Big Is AWS Next To North America?

In fiscal 2025, AWS generated $129 billion of revenue, compared with $426 billion for North America, Amazon's biggest business and the segment that holds the US network. AWS grew faster that year, expanding by 19.7% against 10.0% for North America.

The latest quarter reflects the same pattern. Management said AWS revenue grew 39.3% from a year earlier in fiscal Q3 2026, compared with 6% for North America in the same quarter. Management said that North America's quarter was held back because Prime Day moved into the second quarter of 2026.

AWS also earned more than North America in the latest quarter. Management said AWS operating income reached $17.8 billion in fiscal Q3 2026, compared with $8.7 billion for North America.

What Does Amazon's New Emphasis Mean For You?

For a shareholder, the quiet on regionalization reads as reassuring rather than concerning. During the fiscal Q4 2025 call, management said the regionalized US network was operating at scale and that it continues to make refinements. That reads as a finished project that management is still fine-tuning.

The concern lies in the cost of the business that took its place in management's remarks. Amazon is spending heavily to build AWS. Management expects cash CapEx of about $220 billion in 2026, the majority for AWS, and meaningfully more in 2027. Amazon's free cash flow was negative $46.9 billion over the past twelve months, compared with a positive $10.6 billion a year earlier.

During the latest call, management said Amazon is on track to reduce its cost to serve per unit for the fourth year in a row. The detail to watch is whether management confirms that fourth cut when Amazon reports in February 2027. A confirmed cut would support the reassuring reading of the quiet on regionalization.

Does This Mean You Should Act On AMZN?

Our purpose is to inform you with unique data so you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose.

There is a smarter approach. Since its inception, the Trefis High Quality (HQ) Portfolio has returned 105%, beating the benchmark that combines the three major indices - the S&P 500, S&P Mid-cap, and Russell 2000. And it did so without taking the concentrated risk that comes with do-it-yourself stock picking. If that is how you want to invest, the HQ Portfolio is the place to start.

Spot an error or want more like this? Tell us in 10 seconds.