Amazon price drop: Did tech giant finally hit a price investors can afford?

Dubai: Amazon isn’t just a retail powerhouse anymore. From cloud computing with Amazon Web Services (AWS) to digital advertising, streaming, audiobooks, music, pharmacy, and even groceries through Whole Foods, the company has expanded far beyond its e-commerce roots.

For years, the stock was widely regarded as a must-own business at a price most investors couldn’t justify. But with recent market moves, that question is back on the table: Is Amazon finally reasonably priced now?

After posting its Q2 2025 results, Amazon shares dropped almost 10% in two days, recovering slightly but still down roughly 5% since the earnings release. Investors seem cautious, despite the company reporting strong operating income growth outpacing revenue gains.

The cautious mood stems partly from slower-than-expected AWS growth. While AWS still leads the cloud market, Microsoft Azure and Google Cloud are outpacing Amazon in revenue growth. Amazon’s projected Q3 growth—10% to 13% in revenue, with operating income forecasts ranging from an 11% decline to an 18% increase—adds to investor uncertainty.

Free cash flow has fallen sharply, from $53 billion for the year ending June 2024 to $18.2 billion a year later. Amazon is funneling this cash into expansion: building AWS data centers, developing generative AI tools, enhancing Prime delivery, and more.

This aggressive reinvestment model is central to Amazon’s identity. Unlike peers such as Apple, Microsoft, Alphabet, and Meta, Amazon prioritizes growth over short-term returns. Stock-based compensation exceeds buybacks, contributing to ongoing share dilution and inconsistent earnings per share.

Amazon’s approach has historically rewarded patient investors, but it produces volatility—shares have fallen at least 25% from their peak three times in the last decade. Investors need to understand that buying Amazon is a bet on long-term innovation rather than immediate profit.

AWS remains dominant, and Amazon’s investment in AI and capacity expansion could cement that lead. Meanwhile, the stock’s forward price-to-earnings ratio of 33.9 now aligns closely with Microsoft’s 33.6, making Amazon more attractive on a valuation basis than in years past.

Buying Amazon stock today requires a high tolerance for risk. If investments in AI and cloud infrastructure succeed, returns could be substantial.

If they falter, the stock could remain under pressure. Investors seeking more predictable capital allocation may prefer Microsoft or Alphabet as cloud plays.

Amazon also continues to shake up the advertising market. Competitors like Trade Desk are now facing pressure from Amazon’s growing ad offerings, as analysts warn of a more challenging landscape for independent ad-tech firms.

Amazon is at a crossroads: its stock is more reasonably valued than in the past, but the company’s heavy reinvestment strategy and competitive pressures mean gains aren’t guaranteed. For those betting on long-term innovation and cloud dominance, the risk may be worth it. For others seeking steadier returns, patience—or alternative mega-cap plays—might be wiser.