Amazon Bets on Giant Stores and AI Cloud Muscle to Break Out of Its Growth Rut

AmazonAMZN

is starting to look like the Magnificent Seven’s chronic underachiever — and Wall Street’s losing patience. The e-commerce heavyweight posted the weakest performance among its peers for the seventh straight year, rising just 5% in 2025 while the Nasdaq 100 jumped 20%. That gap is forcing a full-scale reset across physical retail, pricing, and cloud as Amazon tries to keep up in the AI race.

Amazon’s price tell: The struggle isn’t just about market perception. CEO Andy Jassy confirmed at Davos that tariffs are finally showing up in marketplace prices now that sellers have burned through pre-tariff inventory. “Some sellers are deciding that they’re passing on those higher costs to consumers… some are deciding that they’ll absorb it… and some are doing something in between,” Jassy explained, marking a stark shift from last June when he claimed prices hadn’t “appreciably” risen.

• Amazon trades at ~24x forward earnings — cheaper than AppleAAPL
  , MicrosoftMSFT
  , and AlphabetGOOGL
  , and well below its five-year average of 36x.
• While the company says prices haven’t moved much beyond normal noise, WalmartWMT
  , TargetTGT
  , and Home DepotHD
  have warned that tariffs are pushing costs higher.

Two Birds, One Store

To claw back momentum, Amazon is shifting from experiments to scale. Its physical retail push has been messy, with dozens of branded stores shut and over half of Amazon Go locations closed. Now, it’s making its biggest brick-and-mortar bet yet with a ~230K square-foot megastore in Orland Park, Illinois — nearly the size of two average Target stores. Baird analyst Colin Sebastian says the big-box strategy fits better than past attempts, since Amazon’s online business already operates like a mass-market retailer. The space will be split between groceries and essentials on one side, with fulfillment for online and in-store orders on the other.

• Amazon still has a lot of ground to make up — more than 80% of US retail sales happen in stores, where CostcoCOST
  and Walmart run the game.
• One advantage is that Amazon has grown to ~20% of the US furniture and home-furnishings market as of last fall — up from ~9% in 2019 — while Walmart has slipped to 7% from 9.3%.

Closing the gap: Bulls are betting that Amazon Web Services is the lever that finally re-rates Amazon out of its cloud laggard reputation. Winslow Capital’s Pat Burton says stronger AWS results could “materially” change perception of the stock. That case is getting backup from the numbers, as Bloomberg-compiled estimates show Amazon’s earnings per share rising ~12% in 2026 and 22% in 2027, with revenue growing ~11% annually. AWS also posted its fastest growth in years in the October quarter, then followed it with a $38B deal to supply computing power to OpenAI. The market may start forgiving the lag the second AWS starts sprinting.