Amazon Stock 2026: Tariffs Create Headwinds – Can AI Growth Offset the Risks?
- Why Are Tariffs Rattling Amazon Investors?
- AWS: The Unshakable Profit Engine
- Wall Street’s Split Verdict
- The Bottom Line
- Amazon Stock: Key Questions Answered
Why Are Tariffs Rattling Amazon Investors?
The WHITE House’s announcement of 10% tariffs on imports from several European countries—part of a diplomatic maneuver to pressure Denmark over Greenland negotiations—has sent shockwaves through the market. If talks fail, tariffs could spike to 25%. This geopolitical uncertainty is hitting growth stocks hard, especially as rising bond yields make future earnings less attractive. Amazon’s CEO, Andy Jassy, isn’t sugarcoating it: he’s already seeing tariffs “creep into” product prices as third-party sellers deplete inventories imported under older terms. For Amazon, this spells trouble:
- Retail margins could tighten: Higher costs may squeeze profitability in e-commerce.
- Consumer demand at risk: Pricier goods could dampen spending.
- Forecasting headaches: Trade policy volatility makes financial planning a nightmare.
AWS: The Unshakable Profit Engine
While retail wobbles, Amazon Web Services (AWS) remains the bull case. The cloud division now delivers 66% of the company’s operating profit at a staggering 35% margin. Here’s why AWS might save the day:
- Growth surge: Q3 2025 revenue hit $33 billion, up 20% YoY—the fastest clip since 2022.
- AI gold rush: A $38B deal powers OpenAI’s compute needs, with talks underway for another $10B+ investment in Amazon’s custom “Trainium” AI chips.
As one BTCC analyst put it: “AWS is the life raft keeping Amazon afloat in choppy seas.”
Wall Street’s Split Verdict
Analysts are torn, though Optimism lingers. Of 62 tracked by TradingView, 57 still rate Amazon a “buy.” But price targets tell a mixed story:
| Firm | Action | New Target |
|---|---|---|
| Rothschild & Co Redburn | Cut | $230 |
| Scotiabank | Raised | $300 |
At a forward P/E of 24 (below its 5-year average of 36), Amazon looks cheaper than Apple or Microsoft. But the real test comes in early February with Q4 2025 earnings—where analysts expect 26% operating profit growth.
The Bottom Line
Amazon’s at a crossroads: tariffs threaten its retail dominance, while AWS and AI firepower offer escape velocity. The coming earnings report will reveal whether the company can navigate these headwinds—or if investors should brace for turbulence. One thing’s certain: in 2026, betting on Amazon means betting on Jassy’s ability to outmaneuver geopolitics with innovation.
Amazon Stock: Key Questions Answered
How are tariffs impacting Amazon?
The 10-25% tariffs on European imports are gradually increasing product costs, which may reduce retail margins and consumer demand.
Why is AWS crucial for Amazon’s future?
AWS contributes 66% of operating profit with 35% margins and is growing at 20% annually, offsetting retail weaknesses.
What’s Amazon’s valuation compared to peers?
Its forward P/E of 24 is below Apple (28) and Microsoft (32), making it relatively undervalued.
