Amazon.com Inc

Amazon's retail business has successfully expanded from books into various categories by focusing on enduring customer problems such as limited selection, high prices, and slow delivery. This commitment to solving these issues provides Amazon with a continuous incentive to invest in fulfillment, software, logistics, and new services. The company's culture of continual improvement, while not making it immune to disruption, encourages it to adapt and enhance existing methods as it develops better solutions. This adaptability, combined with a strong moat, positions Amazon favorably for future growth.

Amazon was another relative detractor. The shares rose in July after Amazon reported strong quarterly results that highlighted the strength of its AWS cloud-computing business. However, the shares declined in August as investors again focused on the company's rapid capital investments in AI, logistics and fulfilment infrastructure. While this investment cycle has fuelled concerns about cash flow, the company’s management team expects this spending to help build on core competencies in ecommerce, cloud computing, digital advertising and grocery retail.

Amazon has continued to invest heavily in AI, logistics and fulfilment infrastructure. Its AWS cloud-computing business has continued to deliver consistent high-margin growth, supported by AI and cloud migration tailwinds. A record backlog has helped support earnings visibility. The retail business has remained stable, and advertising revenues have accelerated, benefiting from the need to fund this capital investment cycle. Overall, we see Amazon as a strong player in the market, leveraging its investments to maintain a competitive edge.

Amazon.com (AMZN) demonstrated solid growth across its largest operating segments, with Amazon Web Services (AWS) notably reaccelerating at scale. This growth contributed to over 60% of Amazon’s total operating income in the second quarter. The company also provided a credible profitability roadmap for its AI investments, alleviating concerns regarding capital expenditure monetization. The positive trajectory in AWS and the strategic focus on AI investments position Amazon favorably for future growth.

The letter discusses the semiconductor industry and mentions Amazon in the context of reducing positions into share price strength, but does not provide a specific argument or stance regarding Amazon's future performance or valuation.

Amazon's share price increased 14% during the second quarter and is up 3% year-to-date. As with our other hyperscaler investments, we believe investor concerns around the magnitude of capital expenditures behind the datacenter buildout at Amazon Web Services (AWS) continue to weigh on the stock. These concerns understate the resiliency of Amazon's business and its significant growth runway, as evidenced by the company's robust operating momentum. Increasing AI adoption has materially accelerated AWS's revenue growth profile from 20% growth in 2024 and 2025 to more than 30% this year. Likewise, Amazon's retail segment continues to take market share, with unit volumes up 15% in Q1 2026, the fastest pace since 2021. Longer term, we believe Amazon can compound earnings at a 20%-plus rate, driven by secular tailwinds from AI and rising e-commerce penetration alongside substantial retail margin expansion.

Amazon is another member of this elite group generating high returns, and we think it is being quite rational by rapidly compounding its asset base at these returns. During the quarter, Amazon grew revenue by 17% and operating income by 30%. While the bears continue to complain about Amazon's $200 billion in capex growth and dwindling free cash flow, we estimate this incremental capex will increase the 2025 total asset base by around 28%. With 30% cash flow growth on what we assume is at least 28% asset growth, we conclude Amazon is achieving at least as good, if not better, returns on capital than it has previously - yet the stock is trading near historically depressed multiples. This is another telltale sign to us that the Company's aggressive free cash flow reinvestment is very rational and that the depressed valuation presents an excellent long-term investment opportunity for us.

Amazon.com reported strong results during the first quarter. AWS revenue growth accelerated to 28%, its fastest growth rate in 15 quarters. Amazon Bedrock, a fully managed service providing secure access to leading large language models, grew 170% quarter-over-quarter. 125,000 customers are using Amazon Bedrock including 80% of the Fortune 100. Most of Amazon Bedrock’s inference demand is powered by Amazon’s internal Trainium chips. Amazon’s chips business, which consists of Trainium and Graviton, is now over a $20BN run-rate business growing triple-digits year-over-year. Amazon remains a dominant world-class company with powerful secular tailwinds in place including its e-commerce penetration, digital advertising growth, and the transition to the cloud.

Amazon.com reported strong results during the first quarter. AWS revenue growth accelerated to 28%, its fastest growth rate in 15 quarters. Amazon Bedrock, a fully managed service providing secure access to leading large language models, grew 170% quarter-over-quarter. 125,000 customers are using Amazon Bedrock including 80% of the Fortune 100. Most of Amazon Bedrock’s inference demand is powered by Amazon’s internal Trainium chips. Amazon’s chips business, which consists of Trainium and Graviton, is now over a $20BN run-rate business growing triple-digits year-over-year. Amazon remains a dominant world-class company with powerful secular tailwinds in place including its e-commerce penetration, digital advertising growth, and the transition to the cloud.

Amazon is strategically positioned in the competitive landscape of AI and cloud services. The company is actively working to control its platform while ensuring that the intelligence beneath it remains interchangeable. This is exemplified by initiatives like Trainium, which reduces dependence on Nvidia, and Bedrock, which fosters competition among model providers. Such moves not only enhance Amazon's operational efficiency but also solidify its competitive moat in a rapidly evolving market where control over customer relationships and data is paramount. The ongoing investments in AI infrastructure are expected to yield significant returns, reinforcing our bullish stance on Amazon's long-term growth potential.