Amazon.com Inc. (NASDAQ:AMZN) is captivating investor interest through recent developments that reflect upon the company’s heavy focus on its planned AI infrastructure buildout. This includes plans to deploy two million additional NVIDIA GPUs during 2027 and 2028. The company also intends to add more AI-enabled security and routing solutions to its portfolio through large-scale investments in its Delivery Service Partner program. See why Jim Cramer fancies Amazon with its attractive valuation and dominant cloud engine.
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Billion-Dollar Bets: Drivers, Debt, and the Cloud
Amazon recently shared its plans to put $1.9 billion into its Delivery Service Partner program in 2027, with the bulk of that funding directed toward driver wages. According to Amazon, this investment will help raise driver pay to a national average of nearly $24 an hour. Including this latest commitment, the company has now channeled $21.7 billion into the program over its eight-year run.
The company’s £4.25 billion sterling bond offering broadens its sources of financing at a time when AI spending is pushing up capital requirements. The company completed the £4.25 billion bond offering on September 14, 2026, across four maturities of 3, 6, 12, and 19 years. This opens doors for the UK-based investors in addition to its existing presence in dollar, euro, Swiss franc, and yen debt markets.
Recent financials also project an encouraging momentum for Amazon, especially for the AWS segment. In the second quarter, the company posted $200.6 billion in total revenues, which represents a 20% growth compared to Q2 FY25. AWS once again stood out, with revenue jumping 37% year-over-year to $42.2 billion. Such performance was driven by expansion in enterprise AI adoption, as well as robust migration trends across core cloud services.
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A Costly Path to AI Dominance
The management recently revealed that it is planning to lift the base starting wages for qualifying full-time employees within core U.S. operations by $1. Starting September 27, it will bring the overall rate to $20 an hour. This move reflects a commitment of over $1.5 billion, which adds to fulfillment expenses that had already been accelerating during the first half of 2026.
Additionally, Amazon’s AI-related outlays have already weighed on its free cash flows. The company’s free cash flow slipped into negative territory as it accelerated capital spending on AI infrastructure, with 2026 capital outlays projected at close to $220 billion. The company is simultaneously pouring massive sums into building out additional AI infrastructure, which would continue to affect its free cash flows further down the line.
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Strong Revenue Growth, but Earnings Quality Matters
Amazon is amongst the few companies approaching $800 billion topline with revenue growth close to 20% simultaneously. Following a 19.60% year-over-year growth in the recent quarter, the company has registered $775.68 billion in revenues during the prior twelve months. With a trailing twelve-month net margin of approximately 17.44% exceeding its operating margin of approximately 12.1%, investors should note that earnings were significantly boosted by non-operating gains, primarily related to Anthropic. But overall profitability remains strong.
Amazon’s forward P/E of 23.64x exceeds its trailing P/E of 20.05x, but this comparison is distorted by substantial non-operating investment gains. Investors should assess whether AWS earnings growth can justify the valuation once these gains are excluded.
Institutional Sentiment
Based on data tracked across 1,000+ hedge funds by Insider Monkey, institutional sentiment toward the company remains strong. According to 13F filing data, number of smart-money managers with long-term exposure in the stock has been going up. A total of 369 hedge funds held positions by the end of Q2 2026, compared to 353 in Q1 2026. Short interest is hovering at 0.85%, which shows a very nominal amount of pessimism within the investor base.
BlackRock is the largest institutional stakeholder, as per Yahoo Finance database, holding 748.4 million shares as of June 30. This amounts to 6.94% of outstanding shares. Other notable institutional investors include Vanguard Capital Management and State Street Corporation, holding 5.89% and 3.68% of outstanding shares respectively.
What Lies Ahead
For now, some level of investor skepticism shall prevail around the company’s substantial AI investments. A lot hinges on whether it translates into financial gains instead of overcapacity for the business. Other areas of focus beyond AI buildout and AWS, include robotics and automation expansion, the Leo satellite-internet solutions, and deeper integration of Anthropic/Claude within AWS suite. Ultimately, Amazon’s spending surge could pay off if AWS growth drives stronger profits and free cash flow, but sustained capital intensity and rising operating costs remain key risks.
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