AMAZON COM INC (AMZN) stock intrinsic value fair value estimate & owner earnings analysis

Amazon runs three connected businesses: a low-margin North America and international retail operation (increasingly profitable through its third-party marketplace fees and a fast-growing advertising business), and AWS, its cloud-computing arm, which is high-margin but very capital-intensive. Over the past decade the cash Amazon's owners could actually take out of the business each year, after real running costs (including stock-based compensation, which we treat as a genuine cost even though it doesn't use cash directly), has grown from roughly $0.27 per share in 2016 to about $6.86 per share in 2025, with the growth accelerating sharply over the last three years as AWS and advertising have become a larger share of the profit mix and as the company executed a cost-efficiency and warehouse-network 'regionalization' program starting in 2023. Because that recent growth has been unusually fast, we anchored our valuation on the median of the last three years (roughly the 2024 level, about $5.28 per share) rather than the most recent, highest year, and we assume this pace slows to a more sustainable rate going forward rather than continuing to accelerate. The single biggest judgment in this valuation is how to treat Amazon's enormous and rapidly rising spending on property and equipment -- $131.8 billion in 2025, versus $52.7 billion just two years earlier. Management has said this spending 'primarily reflects investments in technology infrastructure, the majority of which is to support AWS business growth' and additional fulfillment capacity, and that both are expected to keep rising in 2026. Since this is overwhelmingly expansion spending rather than the cost of keeping today's business running, we treated only the amount roughly equal to depreciation each year as the true cost of maintaining the current business, and everything spent above that as growth investment that shouldn't be charged against today's owner earnings. We also excluded a large, one-time-feeling non-cash gain of roughly $14.9 billion in 2025 from the rising value of Amazon's investment portfolio (notably its stake in Anthropic), since paper investment gains are not cash the operating business generates. Our base case assumes owner earnings grow at a mid-teens rate next year -- well below the roughly 30% growth actually achieved in 2025, since that year benefited from an unusual decline in stock-based compensation that we don't assume repeats -- fading gradually to mid-single-digit growth by year ten, followed by a modest, capped permanent growth rate reflecting AWS and advertising as durable, non-wasting franchises. That gives a base-case value of roughly $213 per share. Our bear case (roughly $82 per share, about the worst outcome in ten) assumes the AI/AWS capital spending program fails to generate revenue growth proportional to its cost -- a real and widely discussed risk given the unprecedented scale and pace of this buildout -- so that rising depreciation on the new data-center asset base compresses margins for several years, compounded by renewed retail pricing pressure and a reversal of the recent improvement in stock-based compensation discipline. Our bull case (roughly $315 per share) assumes the opposite: that AI infrastructure investment translates into durable AWS share gains and margin expansion, advertising keeps compounding at a high rate, and the fulfillment-network efficiency program keeps lowering cost-to-serve. In every case, the value attributable to the years beyond our ten-year forecast is a majority of the total estimate; that is typical for a business with this long a growth runway, but it means the valuation leans heavily on Amazon's cloud and advertising franchises remaining durable and well-defended for a very long time, and we've kept the assumed long-run growth rate deliberately modest given the sheer size of the business today. Weighing the unusually wide range between our bear and base cases -- reflecting real execution risk in the capital spending program rather than a lack of research -- against the size of the opportunity if it succeeds, the margin-of-safety price sits at a meaningful discount to our base-case estimate, around $121 per share.