Free cash flow is negative while the cloud build runs, and that is the whole question for anyone weighing the stock today.
Two Multiples, Two Opposite Answers
Amazon.com (AMZN) trades at 22.6 times earnings against 23.9 for the S&P 500, the cheaper of the two on the line buyers check first, though that headline P/E is flattered by a wide gap between net income and operating income: LTM net income of $135.3 billion runs $41.6 billion above operating income, lifted by non-operating gains including Amazon's stake in Anthropic. Switch to cash, and the answer inverts: pricier at 18.7 times operating cash flow against 15.7 for the index, with free cash flow negative outright over the trailing twelve months.
The Cloud Build Is Why Free Cash Flow Is Negative
Management now expects about $220 billion of cash capital spending in 2026, up from an earlier estimate of roughly $200 billion because memory got more expensive. Most of it supports AI and AWS, and it splits two ways: data centers, which take about two years to open and then earn for 30-plus years, and servers and networking equipment, which the company says break even in a little under three years. Earnings already show the profit; the cash statement carries the bill. Buying the earnings multiple means buying that bill too.
#cash #flow #operating #earnings
Two Multiples, Two Opposite Answers
Amazon.com (AMZN) trades at 22.6 times earnings against 23.9 for the S&P 500, the cheaper of the two on the line buyers check first, though that headline P/E is flattered by a wide gap between net income and operating income: LTM net income of $135.3 billion runs $41.6 billion above operating income, lifted by non-operating gains including Amazon's stake in Anthropic. Switch to cash, and the answer inverts: pricier at 18.7 times operating cash flow against 15.7 for the index, with free cash flow negative outright over the trailing twelve months.
The Cloud Build Is Why Free Cash Flow Is Negative
Management now expects about $220 billion of cash capital spending in 2026, up from an earlier estimate of roughly $200 billion because memory got more expensive. Most of it supports AI and AWS, and it splits two ways: data centers, which take about two years to open and then earn for 30-plus years, and servers and networking equipment, which the company says break even in a little under three years. Earnings already show the profit; the cash statement carries the bill. Buying the earnings multiple means buying that bill too.
#cash #flow #operating #earnings
2 days ago
