Amazon's Datacenter Boom: The Next Big Growth Driver for the Stock?

Amazon's AMZN unprecedented datacenter expansion is emerging as the company's most powerful growth catalyst, with AWS infrastructure investments reaching historic levels that position the stock for sustained gains. The company's third-quarter 2025 results delivered AWS revenues of $33 billion, representing 20.2% year-over-year growth, the fastest pace since 2022.

Amazon committed $125 billion in capital expenditure for 2025, with the vast majority directed toward AWS infrastructure. The third-quarter alone saw $34.2 billion in cash capex, while the company added 3.8 gigawatts of power capacity over 12 months — the largest expansion in cloud history.

The datacenter pipeline shows no signs of slowing. December 2025 brought multiple announcements, including a $7 billion, 14-year framework agreement with Telangana, India, to expand AWS Hyderabad infrastructure, plus a $15 billion commitment for Northern Indiana facilities delivering 2.4 gigawatts of capacity. The $11 billion Project Rainier AI supercomputer in Indiana is already operational with 500,000 Trainium2 chips.

AWS now operates 38 regions across 120 availability zones. The infrastructure backlog stands at $200 billion, signaling robust future demand.

With capacity planned to double by 2027 and 2026 capex expected to exceed current levels, Amazon's datacenter buildout represents a structural growth story. Operating income from AWS reached $11.4 billion in the third quarter, demonstrating that infrastructure spending is translating directly into profitability gains.

Rivals Match Infrastructure Pace

Microsoft MSFT and Alphabet GOOGL-owned Google are pursuing comparable datacenter strategies with substantial capital commitments. Microsoft allocated $80 billion for fiscal 2025 infrastructure spending, with Azure cloud revenues advancing 33% year over year. Microsoft's fiscal first-quarter capex reached $20 billion, predominantly targeting AI-enabled facilities. Google parent Alphabet revised 2025 Capex guidance upward twice, reaching $91-$93 billion from an initial $75 billion forecast. Google Cloud generated $13.6 billion in the third quarter with 32% growth, though capacity constraints limited revenue potential. Microsoft maintains over half its investment domestically, while Google deployed $23.9 billion in the third quarter alone — two-thirds allocated to processors and servers. Both Microsoft and Google face tight supply-demand dynamics, with datacenter expansion timelines extending into 2026 as competition for AI infrastructure intensifies across the hyperscale sector.

AMZN’s Share Price Performance, Valuation & Estimates

Amazon shares have returned 8.6% in the past six-month period compared with the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector’s growth of 9% and 8%, respectively.

AMZN’s 6-Month Price Performance

From a valuation standpoint, AMZN stock appears overvalued, trading at a forward 12-month price/earnings ratio of 29.51X, higher than the industry’s 24.42X. Amazon has a Value Score of C.

AMZN’s Valuation

The Zacks Consensus Estimate for AMZN’s 2025 earnings is pegged at $7.17 per share, which has seen an upward revision of 4.8% over the past 60 days. This indicates a 29.66% increase from the figure reported in the year-ago quarter.

Amazon.com, Inc. Price and Consensus

Amazon.com, Inc. price-consensus-chart | Amazon.com, Inc. Quote

Amazon currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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