For much of the past decade, Amazon.com Inc. (NASDAQ:AMZN) trained investors to focus on revenue growth above all else. Margins were secondary. Spending was aggressive. Scale was the story. That narrative is changing, and the market appears to be paying attention.
Amazon’s recent earnings cycles have marked a quiet but meaningful shift in how the company is being valued. Instead of asking how fast Amazon can grow, traders are increasingly asking how profitable that growth can become. At the center of this repricing are three forces that are finally moving in the same direction: stabilization at AWS, tighter cost discipline in the retail business, and the steady rise of advertising as a high margin contributor.
Together, they point toward a potential new phase of margin expansion that could shape how Amazon stock trades over the next year.
Why Margins Matter More Than Revenue Right Now
Amazon is no longer an early stage growth story. With annual revenue already measured in the hundreds of billions, incremental percentage growth naturally slows. What does not have to slow is profitability.
In recent quarters, investors have become more sensitive to operating leverage. Each percentage point of margin improvement carries real weight for earnings power and free cash flow. That dynamic is especially important in an environment where interest rates remain restrictive and markets are less willing to reward growth without discipline.
For Amazon, this shift plays to strengths that were built over years but only recently allowed to surface. The company spent heavily through the pandemic era to expand logistics capacity, cloud infrastructure, and last mile delivery. Now that much of that investment phase is complete, the benefits are beginning to show up in the income statement.
AWS Stabilization Changes The Narrative
Amazon Web Services remains the company’s most important profit engine. While AWS growth slowed meaningfully during the corporate belt tightening cycle, recent results suggest that the worst of the deceleration may be over.
Stabilization matters even more than reacceleration at this stage. AWS …