Massive capex drives Amazon to cheapest valuation since financial crisis
Amazon shares have dropped to a price-to-earnings ratio of 29, their lowest level since the financial crisis, as the company's record $200 billion capital expenditure plan forces it to issue debt despite surging profits.
Amazon stock is trading at its lowest valuation in over a decade, with a price-to-earnings ratio falling to 29. The drop marks a significant shift for the consumer discretionary giant, as its multiple rarely slips below 30. It is the cheapest the stock has been since the financial crisis.
The primary driver of investor caution is the company's unprecedented capital expenditure commitments. Amazon has pledged to spend $200 billion on capex in 2026 alone. This massive outlay outpaces the $175 billion to $185 billion planned by Alphabet and the $125 billion to $145 billion targeted by Meta Platforms.
That level of spending is rapidly draining cash reserves. Despite holding $143 billion in liquidity, Amazon's free cash flow over the trailing 12 months plummeted to just $1.2 billion. The resulting cash crunch prompted the company to sell bonds to fund its investments, including a $25 billion issuance this month.
The aggressive spending appears to be yielding immediate operational improvements. Artificial intelligence investments are boosting performance across the business, notably in e-commerce. In the first quarter of 2026, net sales grew 17% year over year, nearly double the 9% growth seen in the same period of 2025.
Net income surged even faster, climbing 77% in the first quarter compared to a 64% increase the prior year. However, the market is looking past these current gains and focusing on future trajectories. Analysts forecast a much more modest 21% increase in profits for the full year.
For market professionals, the valuation disconnect presents a complex calculation. The current multiple suggests the stock may be in oversold territory relative to its historical premium. Yet, with profit growth expected to decelerate sharply and capital demands forcing debt issuance, Amazon's compressed valuation reflects a genuine shift in its financial profile rather than a simple market overreaction.
