Bond Yields Just Hit a 19-Year High. Why Amazon Still Earns a Place in a Long-Term Portfolio.

Research Desk · September 24, 2026

The Spheres at Amazon's headquarters campus in Seattle. Photo: Janet Ganbold via Unsplash.

Wednesday's selloff had a familiar villain. A blowout reading on U.S. business activity sent Treasury yields sharply higher.

The 10-year yield closed near 5.09%, the highest since 2007. The 5-year crossed 5% for the first time in 19 years.

When a risk-free bond pays 5%, investors get pickier about everything else. Growth stocks felt it most, and Amazon (NASDAQ: AMZN) fell roughly 2% to about $249.

That price is about 13% below where the stock traded at its high this year. For a company whose last quarter was among its strongest in years, that gap is worth a closer look.

Three Businesses Under One Ticker

Most people think of Amazon as the store. That is still the biggest piece by sales, but it is no longer where most of the profit comes from.

Picture a company that owns a busy shopping mall. It also owns the power plant that runs every other mall in town. And it rents out the billboards along the highway leading in.

The mall is Amazon's retail business. The power plant is Amazon Web Services, the cloud computing arm that runs a huge share of the world's corporate software and, increasingly, its artificial intelligence.

The billboards are advertising. Brands pay to be seen by shoppers who are already holding their wallets, which makes those ads unusually valuable.

Each business can stumble on its own. Together, they give Amazon a spread of income streams few companies of any size can match.

$496 Billion in Signed Work

The July report was a clean beat. Total revenue reached $200.6 billion, up 20% from a year earlier.

The cloud business did the heavy lifting. AWS revenue rose 37% to $42.2 billion, its fastest growth in 18 quarters.

It also earned $16.6 billion in operating income on that revenue, a margin near 39%. AWS brings in about a fifth of Amazon's sales and roughly 60% of its operating profit.

The number that stands out most is the backlog. AWS reported $496 billion in contracted future work, growing at a triple-digit pace year over year.

Management says its capacity for 2027 is largely reserved, and some of 2028 is already spoken for. That is demand customers have committed to, not a forecast on a slide.

Why Long-Term Investors Keep It at the Core

For a portfolio built to last, Amazon offers something unusual: growth that does not depend on a single product or a single customer.

Households keep ordering paper towels and batteries whether bond yields are 3% or 5%. More than 40% more items reached customers same-day or overnight in the first half of this year than a year earlier.

Advertising adds a high-margin layer on top. At $19.8 billion a quarter and growing 26%, it is now one of the largest ad businesses in the world.

And the cloud arm is tied to the long-term shift of corporate computing and AI into rented data centers. Amazon's own custom chips, Trainium and Graviton, already run at more than $25 billion a year in revenue.

Amazon is also one of the largest weights in the S&P 500. Many retirement savers already own a slice through index funds, whether they realize it or not.

The Cash Flow Footnote

Honesty requires naming the blemish. Amazon is spending at a pace that has pushed its free cash flow below zero.

The company expects about $220 billion in capital spending this year, raised from $200 billion. Over the past twelve months, operating cash flow was a healthy $161.4 billion, but after equipment and data-center purchases, free cash flow came to a $7.6 billion outflow.

A year earlier, that same measure was an $18.2 billion inflow. If cloud demand cools before the new capacity fills, depreciation on all those buildings and chips will weigh on profits.

Income-focused readers should also note that Amazon pays no dividend. It belongs in the growth side of a portfolio, not the income side.

What the Price Implies

At first glance the stock looks cheap, at about 20 times trailing earnings. That figure flatters Amazon.

Last quarter included a one-time $53.4 billion gain from marking up its stake in AI company Anthropic. Strip that out and look forward, and the stock trades near 27 times expected earnings, a fair price for a company growing this fast but not a bargain.

Wall Street is firmly positive. Of 60 analysts tracked, 58 rate the stock a buy, and the average price target near $328 sits about 32% above Wednesday's close.

The bear case has a number too. The lowest target on the Street is $230, about 8% below today's price, and a lawsuit from the FTC and 22 states over Amazon's advertising practices adds legal risk.

The next checkpoint comes with third-quarter results, expected around October 29. Management has guided to revenue of $197 billion to $202 billion and operating income of $22.5 billion to $26.5 billion.

The Bottom Line

Rising bond yields make every growth stock harder to love in the short run. That is what Wednesday's selloff was about.

But Amazon's underlying engines are running faster, not slower. Retail keeps its customers, advertising keeps compounding, and the cloud arm is sitting on nearly half a trillion dollars of signed work.

The trade-off is plain: heavy spending today, no dividend, and a valuation that assumes the AI buildout pays off. For long-term investors who can accept that, a 13% pullback in a business this durable is the kind of moment worth paying attention to.