Amazon AMZN released its first-quarter earnings report on May 29. Here’s Morningstar’s take on Amazon’s earnings and stock.

Key Morningstar metrics for Amazon

  • Fair Value Estimate: $280.00
  • Morningstar Rating: ★★★
  • Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: Medium

What we thought of Amazon’s Q1 earnings

Amazon announced it has launched Amazon Supply Chain Services, thereby broadening its services availability to the company’s freight, fulfilment and distribution, and parcel delivery.

Why it matters: We view this as an opportunity for Amazon to generate a higher return from its infrastructure and note the similarities to when the company launched AWS in 2006 out of internal services honed to run the company’s e-commerce business at a massive scale.

  • Investors should note that Amazon already offers freight and fulfilment and distribution services, although these have been used mainly by the company’s sellers. 3M, for example, has been using Amazon Freight Services for years to move products from manufacturing sites to distribution centers.
  • The parcel delivery announcement is the latest news associated with these developments. We think the motivation is the same, to increase utilization of existing assets, but the news is sending shares of other common carriers down on May 4.

The bottom line: We maintain our fair value estimate of $280 for wide-moat Amazon as we view the announcement mostly as a continuation of what it was already doing. Over time, Amazon could benefit from being a one-stop shop with a full menu of supply chain services.

  • We are not convinced Amazon wants to materially ramp spending in these areas, given the investment cycle currently being driven by AWS (by a wide margin), delivery network, and facility modernization. We look forward to any new disclosures management may provide around this business.
  • Further, we note e-commerce and logistics are both low-margin businesses, with Amazon’s North America and International segments generating 7.0% and 2.9% GAAP operating margins, respectively. A corresponding group of supply chain providers generates operating margins of approximately 6%.

Big picture: Amazon has earned attractive returns over time and has shown an ability to exit a segment if it is not working.

Fair Value estimate for Amazon

With its 3-star rating, we believe Amazon’s stock is fairly valued compared with our long-term fair value estimate of $280. This implies a 2026 enterprise value/sales multiple of 4 times and a negative 1% free cash flow yield. We note that the free cash flow yield is constrained by the significant AWS capacity expansion underway. Over the long term, we expect e-commerce and international opportunities will pay off in retail; over the medium term, we believe the critical growth drivers over the medium term will be AWS and advertising.

Economic Moat Rating

We assign a wide moat rating to Amazon’s retail, advertising, and Amazon Web Services segments based on network effects, cost advantages, intangible assets, and switching costs. We think many of these areas reinforce one another and see little difficulty in Amazon continuing to deliver returns on invested capital well in excess of its cost of capital over the long term.

AWS specifically has driven profitability for the entire company—although it represents 15%-20% of revenue, it generates the majority of total operating profit dollars for Amazon. We also expect AWS to remain a key growth driver for the company over the next decade.

Financial strength

We believe Amazon is financially sound. Revenue is growing rapidly, margins are expanding, the company has unrivaled scale, and the balance sheet is in great shape. As of Dec. 31, 2025, Amazon had $123.0 billion in cash and marketable securities, offset by $65.6 billion in debt. In our view, the marketplace will remain attractive to third-party sellers, as Prime continues to tightly weave consumers to Amazon. We also see AWS and advertising driving overall corporate growth and continued margin expansion. Given that the company is still in a rapid growth and heavy investment phase, we do not expect it to pay dividends or repurchase shares.

Risk and uncertainty

We assign Amazon an Uncertainty Rating of Medium. Amazon must protect its leading online retailing position, which can be challenging as consumer preferences change, and maintain an attractive value proposition for its third-party sellers.

The company must also continue to invest in new offerings. AWS, transportation, and physical stores (both Amazon-branded and Whole Foods) are three notable areas of investment. AI investments for AWS were substantial in 2025 and will remain so in 2026, for example. These decisions require capital allocation and management focus and may play out over years rather than quarters. Continued international expansion will likely require similar investment and management attention but will also increase exposure to different regulatory environments. Some countries have instituted or may institute protectionist policies. Even domestically over the last several years, lawmakers from both parties have increasingly focused on the amount of market power large technology companies have accrued. Antitrust, data privacy, and Section 230 have been repeatedly invoked.

From an environmental, social, and governance perspective, data breaches and service outages are a concern for any type of cloud service provider. As a retailer, Amazon has personal information for hundreds of millions of consumers around the world, while AWS hosts proprietary mission-critical data for enterprises.

AMZN bulls say

  • Amazon is the clear leader in e-commerce, and it enjoys unrivaled scale to continue investing in growth opportunities and to drive the very best customer experience.
  • High-margin advertising and AWS are growing faster than the corporate average, which should continue to boost profitability over the next several years.
  • Amazon Prime memberships help attract and retain customers who spend more with Amazon. This reinforces a powerful network effect while bringing in recurring and high-margin revenue.

AMZN bears say

  • Regulatory concerns are rising for large technology firms, including Amazon. The firm may face increasing regulatory and compliance issues as it expands internationally.
  • New investments—notably in fulfillment, delivery, and AWS—should dampen free cash flow growth. AWS investments for AI have been substantial and are likely to remain elevated for several years.
  • Amazon may not be as successful in penetrating new retail categories, such as luxury goods, due to consumer preferences and an improved e-commerce experience from larger retailers. The same applies to international expansion.

This article was compiled by Jillian Moore.