Why Amazon's 2026 Rebound Looks Like a Comeback Worth Watching

Amazon disappointed investors in 2025, delivering a mere 6% return while the S&P 500 surged 18%. That underperformance created a unique dynamic entering 2026—one where the tech giant’s valuation finally looks attractive relative to peers, potentially setting the stage for meaningful upside.

Advertising Revenue: The Hidden Profit Engine

Amazon’s advertising division remains the fastest-growing segment of its business, posting 24% year-over-year growth in Q3. This isn’t just about top-line expansion. With typical ad businesses commanding 30-40% operating margins, Amazon’s $17.7 billion in advertising revenue likely generated roughly $5.3 billion in operating profits during the quarter—nearly equivalent to the combined $6 billion in profits from North American and international commerce combined.

This tells a critical story: advertising services have become the margin driver masking Amazon’s low-margin retail business. As this segment continues accelerating, it compounds the company’s profitability regardless of retail performance.

AWS Momentum Is Back

The real catalyst for Amazon’s potential comeback centers on Amazon Web Services. After years of moderating growth, AWS posted 20% year-over-year revenue expansion in Q3—its fastest pace in multiple years. This reacceleration matters because AWS generated 66% of the company’s operating profits while representing just a fraction of total revenue.

Two structural tailwinds are driving this resurgence. First, the ongoing enterprise migration to cloud infrastructure removes the need for expensive on-premises servers and networking equipment. Second, artificial intelligence demand is forcing companies to rent computing capacity rather than build proprietary data centers. AWS sits atop this wave with unmatched scale.

Valuation Reset Creates Runway for Stock Performance

Before 2025, Amazon’s trading multiple sat at a premium versus Big Tech peers. Today, it trades in line with comparable companies—meaning stock gains will flow directly to shareholders rather than compress against an inflated valuation.

Wall Street expects Amazon to grow sales 11% in 2026, roughly market-rate expansion. The real question becomes: how fast can operating profits expand? If AWS and advertising continue posting 20%+ growth rates while commerce stabilizes, operating leverage will drive earnings growth well ahead of revenue growth.

That operating profit acceleration is what separates a flat year from a genuine comeback. The setup exists. Execution will determine whether 2026 becomes the inflection investors have been awaiting.