U.S. stock markets showed strong performance in 2025, with the S&P 500 gaining over 16%, the Nasdaq Composite up more than 20%, and the Dow Jones Industrials rising nearly 13%. The "Magnificent Seven" technology stocks generally performed well, driven by artificial intelligence trends.
Amazon, however, finished 2025 with approximately 5% growth, marking the weakest performance among these seven major stocks. This occurred despite broader market gains.
Amazon's e-commerce operations are undergoing significant changes. The company has invested heavily in robotics and automation within its fulfillment network. Morgan Stanley projects that by year-end, Amazon will have nearly 40 fulfillment centers equipped with robots, potentially saving up to $4 billion.
While Amazon Web Services remains crucial, generating about 65% of operating income from roughly 18% of total revenue in the third quarter, another segment is showing rapid expansion. Amazon's advertising business grew 24% year-over-year, outpacing AWS growth of 20%.
Other segments showed slower growth: third-party seller services increased 12%, subscription services rose 11%, online stores grew 10%, and physical stores increased 7%.
The advertising segment operates with high margins, as Amazon can monetize existing traffic on retail pages, Prime Video, and search results with minimal incremental cost. New partnerships allow advertisers to purchase ad space on Spotify, Netflix, and SiriusXM through Amazon Ads.
As of January 14, Amazon's stock traded at about 34.2 times earnings. This valuation is less than half its five-year average and lower than most Magnificent Seven stocks except Alphabet at 33.1 and Microsoft at 33.5.
The Motley Fool Stock Advisor analyst team recently identified ten stocks they consider better investments than Amazon. Their historical recommendations include Netflix in December 2004, where a $1,000 investment would now be worth $474,578, and Nvidia in April 2005, where a $1,000 investment would now be worth $1,141,628. Stock Advisor's total average return is 955%, compared to 196% for the S&P 500.