Amazon’s stock has underperformed several large-cap technology peers over the past year, even as markets rewarded companies tied more directly to artificial intelligence and software margins. Yet some analysts now view that lag as precisely why Amazon has emerged as a top pick, arguing that its earnings power and strategic positioning are being underestimated in the current market cycle.

Relative Underperformance Masks Fundamental Progress

Compared with mega-cap peers that have seen sharp multiple expansion, Amazon’s share price performance has been more restrained. This divergence is notable given the company’s scale and diversified revenue streams across e-commerce, cloud computing, advertising, and logistics.

The gap reflects investor preference for near-term AI monetization stories and pure software margins. Amazon, by contrast, is still viewed by some as a capital-intensive retailer. Analysts challenging that view point out that Amazon’s cost structure has changed materially, with efficiency gains across fulfillment and transportation beginning to show through in operating income.

This shift matters for valuation. When a company improves margins while expectations remain cautious, the market response can lag fundamentals. For long-term investors, that disconnect often becomes the focal point of renewed interest.

AWS and Advertising Reshape the Earnings Narrative

Amazon Web Services remains central to the bullish thesis. After a period of optimization-driven slowdown, AWS growth has shown signs of stabilization, while profitability remains robust. Analysts emphasize that even modest reacceleration in cloud demand can have an outsized impact on consolidated earnings due to AWS’s margin profile.

Less discussed, but increasingly important, is Amazon’s advertising business. Advertising has become one of the company’s fastest-growing and highest-margin segments, benefiting from Amazon’s first-party data and dominant position at the point of purchase. This revenue stream carries economics closer to digital platforms than traditional retail, yet it is often overlooked in headline comparisons with peers.

Together, AWS and advertising are reshaping Amazon from a low-margin growth story into a more balanced cash-generation platform, a transition that some analysts believe the market has not fully priced in.

Strategic Optionality in a Shifting Tech Landscape

Beyond near-term earnings, Amazon’s strategic optionality remains a key consideration. The company continues to invest in artificial intelligence across cloud services, logistics automation, and consumer-facing applications. While these investments weigh on capital expenditure in the short term, they also position Amazon to participate in multiple layers of the AI value chain.

For global investors, including those in Israel with exposure to US technology through indices and institutional portfolios, Amazon’s diversified model offers a different risk profile than single-product or single-platform peers. That diversity can be a disadvantage in momentum-driven markets, but an advantage when growth leadership rotates.

Looking ahead, analysts will be watching for AWS growth trends, advertising margin expansion, and continued discipline in retail costs. Risks remain, including competitive pressure in cloud services and sensitivity to consumer demand, but Amazon’s recent underperformance has lowered the bar for positive surprises. Whether the stock can close the gap with peers will depend on sustained execution and clearer evidence that its evolving business mix can deliver consistent, high-quality earnings growth.