Outline:
Key Points
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The rise of generative AI is becoming less novel. However, Amazon’s expansion offers it a level of security.
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Robots and generative artificial intelligence have the potential to significantly boost profitability.
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10 stocks that are more favorable than Amazon ›
With its market cap of $2.63 trillion, Amazon(NASDAQ: AMZN)is already the fifth-largest company globally. With such a large scale, it might seem that the e-commerce leader’s period of rapid growth has ended. That assumption would be incorrect. Although Amazon’s revenue is stabilizing, there remains significant potential for enhancing profitability.
Let’s examine three factors that make the stock a favorable investment in 2026 and onwards.
Generative artificial intelligence
Although Amazon is famous for its leading e-commerce marketplace, the company’s sustained success has relied on its capacity to swiftly adapt to new, complementary opportunities as they emerge. For instance, Amazon’s online bookstore enabled it to develop a broad e-commerce platform. Managing this large global website provided it with the information technology skills and knowledge necessary to eventually shift towardscloud computingwith Amazon Web Services (AWS).
In turn, AWS has provided Amazon with an early advantage inthe generative AI industrysince it offers the cloud-powered infrastructure that other businesses require to operate and develop their AI algorithms. The company has also formed a partnership with a top-tierlarge language model (LLM) developer, Anthropic.
This agreement provides Amazon with two major advantages. Firstly, Amazon holds between 15% and 19% ownership in Anthropic, and if the value of this stake increases, it results in non-cash revenue for the parent company. Secondly, Anthropic is required to utilize AWS for its cloud infrastructure, which helps increase Amazon’s operational earnings. Anthropic is gaining significant traction with enterprise customers, as its leading LLM, Claude, holds a 42% market share for coding tasks, compared to OpenAI’s ChatGPT, which has a 21% share in this particular area.
Amazon is deepening its economic moatIn AI infrastructure, the company is creating its own specialized chips, like the Graviton4 line. This approach enables the firm to design hardware specifically for particular applications, enhancing the cost-effectiveness of AI training and processing.
Robotics and aggressive cost-cutting
The most thrilling part of Amazon’s AI journey is that it goes beyond supporting other businesses. The company is also leveraging this technology to enhance its internal processes. In June, CEO Andy Jassy shared a memo stating that he anticipates generative AI will assist Amazon in decreasing its corporate staff in the coming years by increasing efficiency. This could naturally result in improved operating margins and financial performance.
In 2025, Amazon terminated the employment of approximately 14,000 corporate staff. Although leadership stated that this move aimed to cut down on red tape, it’s simple to speculate that artificial intelligence was also a factor, especially in light of the memo released in June.
A report from Reuters suggests that the company might be considering laying off an extra 30,000 employees in 2026. Assuming the typical Amazon employee earns $133,062 annually (based on U.S. data from ZipRecruiter), this could result in potential cost reductions of up to $4 billion, which could significantly affect the company’s profits.
The budget reductions are likely to extend beyond Amazon’s headquarters.TheNew York Timesreports that the technology giant might be considering similar actions within its large-scale warehouse activities, where it hires a significant number of lower-wage but more numerous employees. They argue that in this area, robotics could enable Amazon to grow without requiring half a million additional positions by 2033. This strategy would not only reduce costs for the company but also shield it from issues such as high employee turnover.
Amazon’s workforce reductions and role substitutions make logical sense from a business standpoint. That being said, the company could gain from taking a more measured approach to maintain employee spirits and prevent unnecessary political scrutiny.
Amazon stock is a buy
With a forward price-to-earnings (P/E) multipleof 30, Amazon’s stock is trading at a significant premium compared to theS&P 500an average of 22. However, this seems reasonable given the company’s involvement in generative AI-driven growth and enhanced profitability through the integration of this technology into its own processes.
Is it a good time to purchase shares in Amazon?
Before purchasing shares in Amazon, keep this in mind:
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Will Ebiefungdoes not hold any position in the stocks mentioned. The Motley Fool holds positions in and recommends Amazon. The Motley Fool has adisclosure policy.