Amazon Shares Trade at Discount Ahead of Oct. 29 AI Earnings Report

Amazon shares are trading at a price-to-earnings ratio of 21.2, significantly below the Nasdaq-100 index's 30.2 multiple, as investors await the company's third-quarter operating results scheduled for Oct. 29. The report arrives during a period of elevated inflation and rising interest rates, making strong corporate earnings a necessary component for sustaining the current bull market.

The primary focus for Wall Street will be Amazon Web Services (AWS), the company's cloud computing platform. AWS is consistently Amazon's fastest-growing and most profitable segment, generating $42.2 billion in revenue during the second quarter of 2026, a 37% increase from the prior year. This growth rate accelerated for the fourth consecutive period, indicating significant momentum heading into the third quarter.

AWS competes in the artificial intelligence market by renting computing capacity from advanced data centers that house chips from suppliers such as Nvidia. The company also designs its own data center chips, including Trainium2 and Trainium3, which it claims offer superior price-performance compared to competitors. Amazon both rents and sells these chips, with sales revenue tracking at an annualized rate exceeding $25 billion as of June 30.

The platform's demand remains robust, with AWS reporting an order backlog of $496 billion as of June 30. This backlog, consisting of customers awaiting additional data center capacity, increased by a triple-digit percentage year over year. Amazon Chief Executive Andy Jassy has stated that AWS can eventually reach $1 trillion in annual revenue, framing the upcoming earnings report as one part of a broader long-term growth trajectory.

Beyond AWS, Amazon's flagship e-commerce business is gradually becoming more profitable, contributing to improved earnings over recent years. The company reported earnings of $12.44 per share over the last four quarters. However, a significant portion of the company's pre-tax profit in the first half of 2026 came from non-operational sources. Of the $120.7 billion in pre-tax profit recorded, over $69 billion resulted from paper gains on its investment in Anthropic.

Because these gains are unrelated to core operations, Wall Street forecasts suggest Amazon's earnings may decline to $10.55 per share in 2027, according to average estimates provided by Yahoo! Finance. Despite this projected drop, the stock carries a forward price-to-earnings ratio of 25 based on that estimate. Analysts view the current valuation as attractive, suggesting the stock could be a solid buy ahead of the Oct. 29 report for investors focused on returns over the next five to ten years.