The e-commerce and cloud giant already costs more than the average stock. Can it still beat an index fund through 2031?
The e-commerce and cloud giant already costs more than the average stock.
Can it still beat an index fund through 2031?
Shares of Amazon (AMZN +0.03%) leaped about 5% on Monday. Still, the stock trades near $262 as I write, about 8% off its record close of $284.02 on Aug. 3.
For those buying today, though, the more helpful yardstick is an S&P 500 (^GSPC +0.25%) index fund. From 1928 through 2025, the index compounded at about 10% a year with dividends reinvested, according to historical data gathered by New York University professor Aswath Damodaran. Any one stock needs to beat that to be worth the added risk.
I think Amazon will beat it over the next five years, mostly because its profits are growing far faster than its sales.
Profits are growing faster than sales
Amazon's net income isn't a good gauge now. Its second-quarter net income of $62.6 billion included $53.4 billion in pre-tax non-operating income, mainly from its investments in Anthropic.
Operating income leaves gains like that out, giving a better look at the business itself. And the business looks impressive. Amazon's operating income more than tripled from $22.9 billion in 2020 to $80 billion in 2025, compounding at around 28% a year.
It's still climbing fast, hitting $93.7 billion in the 12 months through June, up 23% year over year.
This growth rate is accelerating, too. By the same measure, trailing-12-month operating income rose around 17% as of December and 19% as of March.
Averytin News Financial update.