Amazon’s Recent Challenges and Future Outlook

Amazon has been struggling lately. It’s been kind of a tough few years for the company, really. But, on the upside, they’ve been busy behind the scenes trying to improve how they run their e-commerce operations. At the same time, it looks like growth will soon pick up for AWS.

Interestingly, stocks like the so-called “Magnificent Seven”—including Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla—are projected to see strong performance in 2025, with an overall growth of about 25% as of December 3.

Alphabet seems to lead the pack, showing impressive results compared to its rivals. It’s doing particularly well lately, and honestly, it looks to be the top contender among these stocks.

Alphabet is still a favorite among long-term investors for its remarkable performance, but there’s a good chance Amazon could surprise everyone in 2026 as it works to enhance its position. The fact that Amazon has been somewhat of an underperformer compared to its companions doesn’t paint the whole picture. Their stock might have risen less than 50% over the last five years, yet it mirrors the positions of Alphabet and Meta before they took off.

Amazon has made significant strides in e-commerce by not only selling products online but also creating the largest logistics network globally, ensuring quick deliveries. Recently, they’ve integrated more robots and artificial intelligence into their operations, which is making things a lot more efficient.

Interestingly, leadership in robotics is often undervalued. Although Amazon designs and makes these robots for its own systems, they don’t have the strongest reputation in this arena. However, they currently operate over one million robots in their fulfillment centers, some capable of performing advanced tasks. For instance, they’ve introduced Vulcan, a robot that senses touch and can handle a wider variety of items, and others that can scan for damaged products, which helps cut down on costly returns.

These robots are optimized with DeepFleet AI models, aiding in efficient operations. AI plays a role in optimizing delivery routes and determining optimal warehouse locations as well. This is all about making delivery times shorter and costs lower.

Moreover, Amazon’s digital advertising segment has quietly climbed to become the world’s third-largest player, right after Alphabet and Meta. This high-margin sector is growing rapidly, thanks to AI tools that assist sellers in crafting effective campaigns and improving ad targeting.

Last quarter, the North American division of Amazon saw operating profit rise by 28% on an 11% revenue increase. That’s some strong operating leverage!

Despite the hurdles AWS has faced compared to its competitors like Microsoft Azure and Google Cloud, revenue is now on the upswing, with a 20% increase reported last quarter. The expansion of Project Rainier, featuring cutting-edge custom AI chips, is crucial to AWS’s growth. Plus, the partnership with OpenAI, which includes a massive $38 billion deal, will have some AI workloads running on Amazon’s infrastructure.

To meet rising demand, AWS is also investing in more capital and recently introduced new AI hardware, including the Trainium3 chip, and other software tools. The prospects for AI agents seem promising as well.

In summary, while Amazon has faced challenges, particularly with its e-commerce and cloud services, there are signs of potential resurgence. I’m optimistic about Amazon’s ability to rebound. As we head into 2026, I think it might actually be a standout among the Magnificent Seven, especially given its appealing valuation.

But, it’s worth noting, before jumping into Amazon stocks, one should think carefully about their options.