After a challenging year in 2025 for many tech stocks, the U.S. stock market rebounded impressively, with the S&P 500 climbing over 16%, the Nasdaq Composite exceeding 20%, and the Dow Jones Industrial Average rising nearly 13%. Among the notable high performers known as the “Magnificent Seven,” which includes the top technology companies benefitting from the artificial intelligence boom, one name stood out for its lackluster performance: Amazon. The tech giant managed only a 5% increase in its stock price, making it the weakest performer among its peers.
Despite this underwhelming outcome, analysts remain optimistic about Amazon’s prospects for a turnaround in 2026. Significant improvements in its e-commerce operations are poised to enhance the company’s profitability. Traditionally known for operating on razor-thin profit margins, Amazon has begun revamping its logistics network with substantial investments in robotics and automation. These upgrades have positioned the e-commerce segment to run more efficiently, ultimately saving the company up to $4 billion in operational costs, according to projections from Morgan Stanley.
As of the latest reporting, Amazon holds a market capitalization of approximately $2.6 trillion, with shares trading around $239.12, having seen daily price fluctuations between $236.41 and $239.57. Despite trading at a price-to-earnings ratio of 34.2, which signals a relatively favorable position compared to its own historical averages and against peer companies like Alphabet and Microsoft, analysts believe the market is undervaluing Amazon’s diverse portfolio.
While Amazon Web Services (AWS) remains a critical pillar of Amazon’s financial health, accounting for 18% of total revenue and over 65% of operating income in the third quarter, another segment is gaining traction: the advertising business. Amazon’s advertising division has emerged as the fastest-growing segment, showcasing an impressive 24% year-over-year increase, outpacing AWS’s 20% growth. This growth highlights the potential for high-margin revenue generation, leveraging Amazon’s vast consumer traffic to sell advertising space on various platforms, including new partnerships with Spotify, Netflix, and SiriusXM.
This shift in focus to advertising underscores Amazon’s strategy to diversify its revenue streams, which could lessen reliance on a single business line. The advertising segment, characterized by much higher margins and lower incremental costs, promises to be a viable contributor to Amazon’s financial stability.
While Amazon faces unique challenges, especially considering the stock’s recent performance, signs of recovery are becoming evident. As operational efficiencies materialize and growth in advertising accelerates, many believe that Amazon is set for a significant rebound in the year ahead. Investors and analysts alike are watching closely, hopeful that the company’s multifaceted approach will ultimately translate into strong performance in the marketplace.
