Amazon’s next chapter: A look back at 2025 and what investors should expect in 2026 | Colorful fool

Amazon (AMZN 1.24%) enters 2026 in a stronger and more diversified position than it was at the same time last year. While retail continues to define the brand, the year 2025 has shown that the economic engine of the company is increasingly driven by cloud computing, advertising and artificial intelligence (AI).

If 2025 was the year of foundation building, then 2026 may be the year investors begin to see an acceleration. Here’s what stood out in 2025 and what long-term investors should expect next.

What 2025 taught us about Amazon

AWS regained momentum through AI

Cloud computing Amazon Web Services (AWS) entered 2025 with questions hanging over its competitive position. But as the year progressed, AWS reasserted itself as Amazon’s most important profit engine.

Revenue grew in the mid- and high-teens over the year, supported by rising enterprise demand and accelerating AI workloads. Amazon has leaned heavily into its own silicon strategy—Trainium and Inferentia—providing customers with more cost-effective training and inference capabilities. Meanwhile, Bedrock has made it easy for companies to build generative AI applications using Amazon’s own models or those of partners like Anthropic.

Rather than competing for consumer-focused AI attention, AWS has focused on supporting the back end of AI adoption. This has deepened customer engagement and expanded the long-term opportunity as more companies expand their AI deployments.

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Key data points

Market capitalization

2425 billion dollars

Daily range

$226.32 -$230.83

Range 52 weeks

$161.38 -$258.60

Volume

1.2 million

Avg. flight

49 million

Gross margin

50.05%

Dividend yield

ON

Advertising has become Amazon’s fastest growing segment

The year 2025 marked a turning point for Amazon’s advertising business. Annualized advertising revenue exceeded $60 billion, surpassing retail, subscriptions and even AWS. The driver was simple: Amazon sits at the intersection of purchase intent, first-party data, and media consumption.

Prime Video’s move to an ad-supported level gave Amazon immediate scope in streaming ads. The Fire TV integration helped unify Amazon’s connected TV footprint. Within e-commerce, sponsored products remain one of the highest converting ad formats in the digital market.

Notably, Amazon’s demand platform has expanded its partnerships Netflix, A yearand third party publishers. This allowed Amazon to sell targeted ads outside of its own properties, a quiet but significant step toward becoming a broader adtech player.

Retail slowed but remained strategically important

Amazon’s US e-commerce growth to moderate in 2025 WalmartTemu and Shein increased the competitive pressure. International markets such as India and Brazil grew faster but still had lower margins.

Even so, retail held up well strategically. For example, e-commerce revenue in North America grew by 11% in the third quarter of 2025. International saw stronger year-on-year growth of 14%. Similarly, operating income improved in the first nine months of 2025. In short, retail may not have been the growth engine in 2025, but it continued to deliver solid progress and provide the data that powers AWS and advertising.

What investors should expect in 2026

With the foundations laid in 2025, 2026 has the potential to show how these pieces come together.

AWS is entering an AI-driven acceleration phase

AI workloads are expected to account for a larger share of AWS revenue by 2026. Demand for training and induction remains strong, and more and more enterprises are moving mission-critical applications to the cloud.

The key issue is margin performance. Amazon’s heavy capex will still weigh on near-term profitability; however, if usage grows steadily, AWS could see steady growth and better operating leverage. For perspective, capital expenditures (capex) rose from $55 billion in the first nine months of 2024 to $92 billion in the same period in 2025. 2026 may be the first year that investors get clearer information on how building artificial intelligence translates into financial returns.

Advertising is becoming a more visible source of income

Advertising is expected to remain one of Amazon’s most dependent growth drivers in 2026. Investors should expect expansion on three fronts, including retail media, connected TV and off-Amazon adtech — through Amazon’s demand-side platform (DSP). Together, these drivers should contribute significantly to both top-line growth and margin expansion.

Retail is becoming more efficient even with moderate growth

Amazon likely won’t return to double-digit retail growth in 2026, but that shouldn’t be a concern. The focus is shifting to efficiency with more automation in warehouses, faster delivery centers and improved personalization with AI.

If Amazon can increase retail margins, even incrementally, along with an acceptable growth rate, the result—combined with stronger AWS and advertising contributions—could provide a substantial boost to overall profitability.

What does this mean for investors?

Amazon enters 2026 with three sustainable engines: AWS, advertising and AI. Retail may not be driving the headline growth numbers, but it remains the backbone that supports the broader ecosystem. For long-term investors, Amazon remains a business worth watching closely—and, valuation permitting, owning.