The share price of Amazon (AMZN +1.66%) has, for the past twelve months, remained stubbornly static. This is not to say the company is failing, merely that the market, with its peculiar and often irrational enthusiasms, has not yet found a reason to bid it higher. The forthcoming earnings report, due on February 5th, may change this, but investors should approach the matter with a degree of skepticism. The focus, inevitably, will be on Amazon Web Services (AWS).
The Cloud and the Competition
AWS is, in essence, Amazon’s rent-seeking operation – a vast provision of computing power and storage sold to others. It currently holds the largest share of the global cloud market, approximately 29% according to Statista. This dominance, however, is not guaranteed. Microsoft and Alphabet, both formidable entities, are aggressively expanding their own cloud offerings, and the competition is intensifying. It is a simple truth that monopolies, even in the digital realm, are rarely permanent.
The sheer size of AWS naturally leads to a slowing of growth. Exponential expansion is unsustainable. However, the third quarter of 2025 saw a modest reacceleration, with growth reaching 20% – the highest figure in eleven quarters. A backlog of $200 billion exists, representing commitments made by clients. Whether this backlog translates into actual revenue, and more importantly, sustained growth, remains to be seen.
The current fascination with artificial intelligence is, for AWS, both an opportunity and a potential distraction. The company offers a suite of AI services to its cloud clients, including tools for building and deploying large language models. This is presented as a key driver of future growth. The question is not whether Amazon can offer these services, but whether it can offer them at a price point that is both competitive and profitable. The market is rapidly becoming saturated with AI offerings, and the true value of many remains dubious.
Amazon’s management claims to be releasing new features at a faster rate than its competitors. This, they suggest, will translate into increased market share. It is a plausible assertion, but investors should not mistake activity for progress. The key metric is not the quantity of features released, but their utility and their impact on the bottom line. A constant stream of innovations, if irrelevant to the needs of clients, is merely a costly exercise in self-promotion.
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2026-01-27 20:33